Pacific governments lean on welfare top-ups to cushion fuel price shock, specialist writes

Fiji, Tonga, Cook Islands, the Marshall Islands and Tuvalu have used three different social protection models to soften the oil price spike for households, Jesse Doyle wrote on the Devpolicy Blog.

National Bank of Tuvalu, Funafuti

Source: lirneasia

Pacific governments are relying on social protection systems rather than energy subsidies to soften the oil price spike for households, and three distinct models of response have emerged, Jesse Doyle wrote on the Devpolicy Blog.

Doyle is a Senior Social Protection Specialist (Economics) at the Australian Government’s Partnerships for Social Protection programme (P4SP). The oil price spike triggered by the Middle East crisis has been the most disruptive economic shock facing the Pacific and the world since the COVID-19 pandemic, he wrote.

The price increases have not stayed at the pump. Rural and outer-island households face higher transport costs that are hard to avoid and higher freight costs built into the price of delivered goods, along with direct losses to fishing livelihoods and food security.

Low-income households are the most exposed because they spend a higher share of their income on food and transport, Doyle wrote. In Tuvalu, food accounts for about 46 per cent of household consumption. Informal and self-employed workers in transport, trade and small-scale commerce are caught between rising costs and weaker demand, with no employer to absorb the shock.

The most widespread response so far has been vertical expansion: leaving programmes and beneficiary registers untouched while temporarily raising benefit levels. Fiji increased benefits by 50 per cent across all six of its main social assistance programmes for three months from May to July 2026, and its wider package also included rebates for bus operators and for Energy Fiji Limited.

Tonga made one-off payments of TOP100 in August to elderly people and people with disabilities who received benefits in July. Cook Islands gave a flat NZ$20 top-up to recipients of its old age and disability pensions, hardship payments, carer’s allowance and child benefit, with the newborn allowance and paid parental leave excluded.

Past evidence suggests topping up existing systems works, Doyle wrote. An evaluation of Fiji’s top-ups after Tropical Cyclone Winston in 2016 found recipients recovered faster than comparable non-recipients across health, housing, food security and livelihoods, with the strongest gains among female-headed households.

A second approach, so far unique to the Marshall Islands, uses a universal payment as an economy-wide shock absorber. The Enra programme, barely a year old, was designed to pay about US$200 per person each quarter; the second payment fell to about US$160 because more people enrolled than expected, and a World Bank grant restored it.

The third approach is to build new needs-tested schemes. Tuvalu’s temporary Household Cost of Living Support Scheme, announced in its latest budget, pays AUD50 per eligible household member a month, including dependent children, for an initial three months, for households with average income below AUD300 per person a month.

That threshold sits above the national poverty line used in Hardship in Tuvalu, an April 2025 report by the Pacific Community and the Tuvalu Central Statistics Division, which put the cost of basic needs at AUD2,668 a year for each adult and found 21.5 per cent of the population below the line in 2022.

The countries able to respond fastest are those that had already built beneficiary registries, payment systems and targeting criteria before the crisis, Doyle wrote. For countries still catching up, the shock is likely to speed up that system-building.