Honduras Social Expenditures and Institutional Review
Honduras has experienced moderate economic growth in the past decade, in line with the rest of the region. Despite this growth track record, limited opportunities for decent jobs for the majority of workers have resulted in stagnant poverty and inequality rates that are still the highest in Central America (CA). In parallel, progress in human development indicators has also been mixed in the last decade. In education, while primary enrollment has significantly increased, low coverage at all other levels of education, inequalities in access and low quality persist. In health, Honduras is close to achieving the 2015 child mortality Millennium Development Goals (MDGs), but maternal mortality, non-communicable diseases (NCDs), and violence pose additional challenges. And despite advances in setting up a social protection system, fiscal sustainability and lack of coordination among interventions prevail, undermining poverty reduction efforts. The ability of the Honduras government to expand safety nets, to increase the access and quality of public education and health services, to engage in active labor market policies, and to improve human development indicators in general, remains limited for a number of reasons. First, overall real social public spending has been on the decline in the last few years. Second, low revenues and fiscal deterioration pose challenges to adequately financing needed social sector improvements. Third, challenges in budget formulation and execution (mainly due to institutional factors) also diminish the impact of social spending. But more importantly, Honduras needs to significantly improve the effectiveness and efficiency of its social spending. This note argues that moving forward Honduras should prioritize three main aspects: a) to rationalize and increase the effectiveness of social public spending by enhancing the pro-poor features of targeting mechanisms; b) to significantly redress the imbalance between recurrent spending, especially the wage bill, and capital expenditure; and c) to continue strengthening information systems tools, legislation, and institutions in an effort to consolidate programs into fewer and higher impact interventions.
| Summary: | Honduras has experienced moderate
economic growth in the past decade, in line with the rest of
the region. Despite this growth track record, limited
opportunities for decent jobs for the majority of workers
have resulted in stagnant poverty and inequality rates that
are still the highest in Central America (CA). In parallel,
progress in human development indicators has also been mixed
in the last decade. In education, while primary enrollment
has significantly increased, low coverage at all other
levels of education, inequalities in access and low quality
persist. In health, Honduras is close to achieving the 2015
child mortality Millennium Development Goals (MDGs), but
maternal mortality, non-communicable diseases (NCDs), and
violence pose additional challenges. And despite advances in
setting up a social protection system, fiscal sustainability
and lack of coordination among interventions prevail,
undermining poverty reduction efforts. The ability of the
Honduras government to expand safety nets, to increase the
access and quality of public education and health services,
to engage in active labor market policies, and to improve
human development indicators in general, remains limited for
a number of reasons. First, overall real social public
spending has been on the decline in the last few years.
Second, low revenues and fiscal deterioration pose
challenges to adequately financing needed social sector
improvements. Third, challenges in budget formulation and
execution (mainly due to institutional factors) also
diminish the impact of social spending. But more
importantly, Honduras needs to significantly improve the
effectiveness and efficiency of its social spending. This
note argues that moving forward Honduras should prioritize
three main aspects: a) to rationalize and increase the
effectiveness of social public spending by enhancing the
pro-poor features of targeting mechanisms; b) to
significantly redress the imbalance between recurrent
spending, especially the wage bill, and capital expenditure;
and c) to continue strengthening information systems tools,
legislation, and institutions in an effort to consolidate
programs into fewer and higher impact interventions. |
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