Poverty in Honduras has hardly changed since 1998, despite positive economic growth at about 3 percent annually in real terms. Why has poverty remained so persistent in Honduras and what can policy makers do to lift living standards? This is a key question for Honduras and the main objective of this report is to investigate the causes and consequences of the country’s high poverty and to provide policy options for sustained poverty reduction and growth.
Continued progress in poverty reduction and growth is a long-term prospect and there are no quick fixes. Nonetheless, as the analysis in this report details, there are policies that could be implemented in the next few years that would have both near- and long-term benefits. Key poverty reduction policy options include the following:
Sustaining Macroeconomic Stability and Growth
- Accelerating economic growth and creating employment and income generating opportunities require continued efforts to improve the business climate.
- Strengthening Honduras’ economic infrastructure regulatory environment will allow for vastly needed operational efficiency, quality services and expansion of access.
- Developing a robust, competitive and accessible financial sector, which facilitates capital accumulation, will require reforms to strengthen the governance and solvency of financial-sector institutions, their regulation and supervision, and their legal and technological infrastructure.
- Improving governance will support the acceleration of economic growth and poverty reduction.
Improving Education Quality to enhance Labor Productivity
- Improving labor force education levels, especially in rural areas, is essential to increasing growth, taking advantage of more open markets, and reducing poverty in the long-run.
- Increasing female participation in the labor market and reducing child labor by increasing access to basic and secondary education, particularly in rural areas.
- Conditional cash transfer programs combined with better access to childcare services can have a large impact on increasing children’s probability of attending school and delaying entry into the labor force.
Improving the Efficiency and Effectiveness of Poverty Spending
- Public social spending and targeted poverty reduction programs could be more efficient and better focused.
- Spending could be reallocated toward pro-poor programs, including primary education, which has the greatest pro-poor impact, but linked to improvements in quality.
- Reducing poverty in rural areas requires secure access to land as a prerequisite for improvements in rural productivity and increasing income generating opportunities for the poor.
- Nutrition and early childhood development programs are urgently needed for children younger than three.
- Lowering transaction costs for remittances and increasing access to savings account services can help the poor smooth consumption and increase access to credit.