Financing Social Protection in Paraguay

This report provides a comprehensive assessment of the financing of Paraguay’s social protection system, with a particular focus on the role of tax revenues and social security contributions. It examines reform options to address financing challenges in contributory health insurance, including the introduction of an additional contribution rate for dependents and the gradual extension of mandatory coverage to different categories of workers. It also assesses the financing challenges of mandatory pension schemes and proposes key parametric reform priorities. The report identifies gaps in the coverage and adequacy of Paraguay’s main social assistance programmes (Tekoporã, Adulto Mayor, and Hambre Cero) and estimates the financing required to expand their coverage under alternative scenarios. It further outlines options to increase general tax revenue, including broadening the personal income tax base. Additional revenue could also be mobilised through higher-excise tax rates on tobacco and alcohol. Finally, the report reviews recent reforms aimed at promoting formalisation and proposes further policy options.