Severe underfunding and inadequate coverage of social protection in LDCs could pose a threat to the goal of ending poverty by 2030, finds new research

A report published today by the research organisation Development Initiatives shows the world’s least developed countries (LDCs) face an 88 per cent external finance gap to achieve the scale of social protection coverage needed to eliminate extreme poverty by 2030.

The research also found that while all countries now have at least one example of targeted social protection, programmes are only reaching 20 per cent of those living in extreme poverty.

Charles Lwanga Ntale, Africa Regional Director at Development Initiatives said, “The over-arching objective of social protection is to protect the livelihoods of the poorest and most vulnerable people. Evidence from across the world shows that social protection is a vital part of eradicating poverty alongside investment in areas such as health, education and agriculture. In spite of this recognition, investments in the sector remain critically low.

“Our research makes it clear that current social protection coverage in LDCs is low, costs are not being met, and current levels of external finance are insufficient. We hope our work will provide a valuable evidence base and useful analysis to feed discussions about the role and importance of social protection in poverty reduction and how we finance this crucially important area of development.”

The report concludes that the increase in aid required to meet financing needs is equivalent to 0.1% of the Organisation for Economic Co-operation and Development (OECD)’s gross national income (GNI). Given the priority attached to eliminating extreme poverty and the limited scope for LDCs to increase their own funding, social protection financing should arguably be the first call on increased aid to ensure the goal of eliminating poverty is achieved by 2030.

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Contact:

Anna Hope, Communications Manager at Development Initiatives

E: [email protected] T: +44(0)1179 272505 M: +44(0) 7894442055

Notes to editors:

The full report can be found at here.

Key findings:

• There is growing body of evidence of the impact that social protection has on poverty reduction, in countries as diverse as Brazil, Ethiopia, South Africa, Malawi, Kenya, India and Rwanda.
• All countries in the world now have at least one type of social protection programme that is targeted at the poorest and most vulnerable.
• In LDCs these programmes are only reaching 20% of those living in extreme poverty – below purchasing power parity (PPP) $1.25 a day.
• Even where extremely poor people are reached, the level of transfer is much less than that needed to sustainably lift poor people out of extreme poverty. In sub-Saharan Africa, for example, the average value of the transfer is 10% of the estimated 42 PPP cents a day that is required.
• Current domestic expenditure on all forms of social protection programmes is on average US$10 per person in LDCs, equivalent to just over 1% of GDP. Most LDCs have some fiscal space to increase their tax revenues and the share of their budget that is spent on social protection. If all LDCs increased their tax to gross domestic product (GDP) ratio to 20% (from the current average of 17%) and allocated 10% to targeted social protection programmes, spending would rise to 2% of GDP, US$16 per person.
• The current average cost of providing the transfer needed to close the extreme poverty gap in LDCs is US$49 per person per year, around 7% of GDP – taking into account start-up costs, administration costs and leakage. This is less than the latest estimates for achieving the sustainable development goals (SDGs) for education (US$60) and health (US$86). By contrast OECD countries spending on social protection is significantly more than health and education combined.
• Even if LDCs increase their spend to US$16 per person there would be a funding gap of US$33 per person. Current DAC donor funding for all forms of social protection-related programmes in LDCs averages US$4 per person per year. As a result 88% of the financing gap is currently unfunded. For comparison purposes, recent estimates suggest the unfunded element for education is 67% and for health is 50%.
• The increase in official development assistance (ODA) required to meet financing needs is equivalent to 0.1% of the Organisation for Economic Co-operation and Development (OECD)’s gross national income (GNI). Given the priority attached to eliminating extreme poverty and the limited scope for LDCs to increase their own funding social protection financing needs should arguably be the first call on increased ODA to ensure the goal of eliminating poverty is achieved by 2030.

Defining social protection

Social protection may be defined as “public actions – carried out by the state or privately – that: a) enable people to deal more effectively with risk and their vulnerability to crises and changes in circumstances (such as unemployment or old age); and b) help tackle extreme and chronic poverty”[1]. It is an umbrella term for various types of approaches, policies, programmes and actions that address deprivation, poverty (for example through the provision of income security payments, or basic health coverage), or vulnerability to financial (and other) shocks as well as to different types of risk. Social protection is a key element of modern economies, accounting for 30% of government spending in OECD countries.

About Development Initiatives

Development Initiatives works to end extreme poverty by 2030 by making data and information on poverty and resource flows transparent, accessible and useable. We help decision-makers use information to increase their impact for the poorest people in the most sustainable way.

Find out more at www.devinit.org

[1] Department for International Development (DFID). 2006. “Social protection in poor countries”. Social protection briefing note series, Number 1. A DFID practice paper. http://www.gsdrc.org/docs/open/SP17.pdf