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Moldova is having an arduous transition from being a centrally-planned economy to one that is guided by market signals, and this has contributed to poverty. Its agriculture-dominated economy is handicapped by the loss of its traditional markets and the slow restructuring of its enterprises. As a result, the economy has been shrinking since independence. This report aims to provide a detailed analysis of the situation regarding living standards in the country, and provide a framework for policy for the Government ' s emerging social assistance program. Chapter 1 examines the composition and distribution of poverty in Moldova. Chapter 2 looks at how income and price shocks have affected the lives of the poor - and motivates the need for employment-generating growth, especially in agriculture, as the only sure way out of poverty for most Moldovans. Chapter 3 discusses the role of the Moldovan state in easing poverty, and proposes a broad strategy to reform social assistance and social sector reform that best uses the limited Government resources. In its efforts to directly alleviate poverty, the Moldovan Government has to overcome three mutually reinforcing challenges: the population ' s high expectations for broad and effective interventions, its own lack of fiscal resources, and the technical difficulties in finding effective targeting mechanisms for Moldova's shallow poverty.
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