Paraguay Poverty and Equity Assessment: Strategies to Boost Inclusive Growth and Poverty Reduction
Overview of the Challenge
Despite significant progress in reducing poverty from 2003 to 2022, Paraguay continues to face spatial and horizontal disparities. The face of poverty is characterized by youth, informality, and low levels of education. Key factors contributing to these challenges include:
- Poverty Reduction: While moderate and extreme poverty rates were halved between 2003 and 2022, the share of vulnerable populations has increased.
- Economic Growth: Economic growth has been accompanied by shared prosperity, with per capita household income growing faster among the poorest segments.
- Non-Labor Income: Non-labor income has played a crucial role in reducing inequality.
Factors Limiting Accelerated Poverty Reduction
Several factors hinder Paraguay's ability to accelerate poverty reduction:
- Human Capital: Low levels of human capital, including education and health.
- Quality Jobs: Limited access to and creation of quality jobs.
- Fiscal System: The fiscal system's impact on poverty has been mixed, with rising labor income driving initial reductions but diminishing returns post-2013.
- Climate Shocks: Vulnerability to climate shocks exacerbates poverty, particularly in rural areas.
Strategies to Foster Inclusive Growth and Accelerate Poverty Reduction
To address these challenges, the following strategies are proposed:
- Human Capital: Improve learning outcomes and ensure equitable opportunities in human capital accumulation.
- Quality Jobs: Increase access to and availability of quality jobs.
- Tax System: Enhance the progressivity of the tax system and improve revenue collection.
- Climate Resilience: Increase resilience to climate shocks.
Key Data and Figures
- Poverty Reduction: Moderate and extreme poverty rates halved between 2003 and 2022.
- Education: Higher scores among students in countries with similar income levels.
- Informality: Informality represents two-thirds of employment, with higher-than-expected rates given GDP per capita.
- Health Insurance: Only 33% of the population reports having health insurance.
- Climate Impact: Over a third of poor and rural workers experienced work disruptions due to severe weather conditions.
- Targeting Social Programs: Improved targeting, particularly in transportation subsidies.
- Direct Transfers: Significant role in poverty reduction but diminished by indirect taxes.
Conclusion
To foster inclusive growth and accelerate poverty reduction, Paraguay needs to focus on improving human capital, enhancing access to quality jobs, reforming the tax system, and increasing resilience to climate shocks. These strategies aim to build a more equitable and prosperous society.