Solutions to avoid social protection finance fragmentation and enhance its coordination

Securing adequate financing remains a critical barrier in establishing and strengthening national social protection systems, including floors, as outlined in the 2030 Agenda (see also Razavi, this edition of Forum). While sustainable economic development and domestic resource mobilization should provide the most reliable funding for social protection, many developing countries, particularly the least developed, must rely on complementary international financial support, particularly during crises. Bridging the substantial financing gap for social protection in low- and middle-income countries, therefore, requires (1) enhancing capacity building in developing countries, (2) rationalizing the use of existing financial resources and (3) innovative investment approaches to ensure sustainable financing solutions up to the challenge.

Enhancing capacity building in developing countries

Investments should focus on establishing sustainable social protection and healthcare systems, with programmes implemented by the countries themselves to ensure ownership. Financing should primarily come from domestic resources, in line with International Labour Organization (ILO) Recommendation 202, which advocates a mix of contributory and non-contributory schemes. Strengthening tax systems, including making them more progressive as well as fighting tax evasion, is essential.

However, closing the financing gap in all low- and middle-income countries requires an additional US$1.4 trillion annually, with low-income nations facing the most severe challenges as they face the largest financing gap relative to their GDP (gross domestic product), amounting to 52.3%. Low-income nations represent 22.3% of the overall financing gap, or US$308.5 billion. At its current scale and level, international funding falls short of the financial gap needed to achieve comprehensive coverage. It only covers the cost of technical assistance for capacity building in developing countries (Cattaneo et al., 2024).

Furthermore, financing capacity building and technical assistance for social protection systems could be seen as a diversion of resources and attention from other critical global issues, such as food security, that also demand significant international cooperation and economic support. If social protection development is not prioritized within developing countries, it cannot be sustainably financed by developed nations alone.

First and foremost, improving coordination and harmonizing social protection policies at national and international levels are essential. The Universal Social Protection 2030 (USP2030) and the Social Protection Inter-Agency Coordination Board (SPIAC-B) work towards providing technical assistance and coordinating policies to enhance social protection systems. While these multilateral initiatives are commendable, they face limitations such as lack of coordination, insufficient responses to crises and inadequate funding. They should be supported better as part of a renewed focus on improving alignment of organizations, systems and programmes. At the national level, establishing country platforms to align technical and financial partners around relevant ministries could also attract investments and enhance action coherence.

Rationalizing the use of existing financial resources

In 2020–2021, during the Covid pandemic, G20 countries reached a common understanding of the importance of social protection in increasing resilience against crises, preventing and reducing poverty, vulnerability and social exclusion, and providing income security during harsh times. In this context, the government of France and the UN Special Rapporteur on Extreme Poverty and Human Rights convened a High-level Expert Meeting on January 28, 2021 to enable stakeholders, including international organizations, multilateral, regional and national development banks, governments and bilateral development agencies, to demonstrate their interest and willingness to strengthen social protection systems. They agreed to pursue, within their respective mandates, the three strategic objectives of maximizing efficiency by coordinating and streamlining ongoing initiatives with a common roadmap endorsed at high-level, enhancing visibility by mapping existing financial programmes supporting social protection systems at the country level and assessing financial gaps to be filled progressively by 2030. This would incentivize international financial efforts to complement domestic resources over a sufficiently long time period to allow strategic planning. ¹

The High-level Expert Meeting also highlighted three major obstacles to the creation of a ‘vertical’ Global Fund dedicated to Universal Social Protection: (1) donor fatigue in the context of the pandemic and urgent financial needs to satisfy in the health sector, (2) costs related to the establishment a new “bureaucracy” for managing a vertical fund and (3) limited political space for social investment in most developing countries confronted with debt constraints.

In the following gatherings of the G20 Labour & Employment Track, in 2021 France called for a renewed political and financial mobilization in favour of ‘Adequate Social Protection for All’, through the adoption of a G20 Joint Roadmap involving potential beneficiary countries to reflect the reality of their needs, foster resource mobilization and lead to enhanced coordination of financial institutions with the Organisation for Economic Co-operation and Development (OECD), the International Labour Organisation (ILO) and other relevant UN agencies. To this aim, France proposed to launch Joint Country Frameworks of Intervention in voluntary recipient countries, with a specific focus on the African continent, after the conclusion of the G20 discussions in 2021. The Integrated National Financing Frameworks defined by United Nations Development Programme (UNDP) in 2015 to maximize the use of budgetary planning tools to achieve Sustainable Development Goals (SDGs) illustrated well the type of structures to be set up.

The launch of the UN Global Accelerator on Jobs and Social Protection for Just Transition in September 2021, to a large extent, met the needs of a relevant framework for policy coordination, addressing fragmentation among actors and funding. Today, developed countries could productively support the Accelerator by offering their technical assistance to the ILO, bridging the collaboration with international donors and identifying pilot projects in pathfinder recipient countries.

In the same spirit, as a result of the Paris joint meeting of the French Minister of Labour, the Managing Director of the International Monetary Fund (IMF), the Director-General of the ILO and the Secretary General of the OECD in December 2019, the ILO and the IMF are collaborating in joint programmes in nine countries. These support national efforts in creating domestic fiscal space for social protection, underpinned by the IMF Strategy for Safeguarding Social Spending in its country interventions (IMF, 2019) and the ILO’s Recommendation 202 on social protection floors.

Innovative investment approaches to ensure sustainable financing solutions

Since the beginning of the Covid pandemic, the IMF has responded to an unprecedented number of emergency financing requests. In 2020, it doubled access to its emergency facilities (Politi, 2020). The IMF’s policy tracker has also aided governments in mitigating the human and economic impacts of crises, including through social protection measures.

The World Bank Group has committed substantial funds to support economic recovery and strengthen social safety nets (World Bank, 2024). In addition, regional development banks, governments, development agencies and private donors are implementing various bilateral and regional programmes to enhance social protection worldwide. The European Union and Public Development Banks, through the Finance in Common network, are aligning financial flows with the 2030 Agenda and the Paris Agreement, aiming to accelerate the adoption of sustainable practices and support global development finance coherence.

Moreover, the European Union, together with the ILO, UNICEF and the Global Coalition for Social Protection Floors, is implementing a comprehensive programme to enhance social protection systems. This initiative provides long-term support to eight countries and offers technical advisory services to others (European Commission (EC), 2023).

All of these multilateral efforts are crucial for a coherent international response to enhance national social protection systems. However, there can be overlaps, and their responses cannot meet the financial challenges at the required level. Beyond the efforts already accomplished, innovative investment approaches and instruments are needed.

For instance, reallocating Special Drawing Rights (SDRs) for social protection can boost liquidity in developing countries, thus supporting their social policies. SDRs, created by the IMF as international reserve assets, supplement member countries’ reserves and can be exchanged for freely usable currencies, bolstering global economic stability.

Fairer taxation on the world’s wealthiest individuals could also be another innovating, though challenging, option, provided that the gathered funds are oriented towards the SDGs’ achievement. Mandated by Brazil’s G20 Presidency, economist Gabriel Zucman’s report proposes a 2% tax on assets of billionaires and those with substantial wealth, aiming to significantly boost annual revenue. ² Implementing such a tax stands to make an important contribution towards addressing the social protection financing gap and other financial needs, such as for securing food security.

Global stakeholders should embrace these approaches as well as others, notably addressing global debt distress in low- and middle-income countries to ensure sustainable and inclusive social protection systems for all. The Fourth International Conference on Financing for Development, taking place from June 30 to July 3, 2025, in Spain, will be pivotal in finding and agreeing bold, innovative solutions with a view to supplementing Official Development Assistance and closing the global financing gap in social protection once and for all.