A. They rely entirely on the government pension for their income

If elderly Runagians rely entirely on the government pension for their income, and the pension has increased, then their overall income has also increased. This does not explain why their financial situation has not improved. Eliminate.

B. Runagian banks are so inefficient that it can take up to three weeks to cash a pension check

If the program was implemented two weeks ago, then it would make sense that elderly Runagian's aren't doing any better - they wouldn't have been able to get any of that extra 20% of pension money yet. But the program was implemented two YEARS ago. They've gotten plenty of larger pension checks since then, so this doesn't explain their unimproved situation. Eliminate.

C. They buy goods whose prices tend to rise especially fast in times of inflation

The passage tells us that there was "negligible inflation" in this time. So it really doesn't matter if the prices of those goods rise quickly during inflation - inflation isn't happening! So there's no reason those goods would be more expensive! Eliminate.

D. The pension was increased when the number of elderly Runagians below the poverty level reached an all-time high

We are asked to explain why elderly Runagians are "no better off" than when the program was implemented. In other words, it doesn't matter where they started, as long as they have improved since then. Even if elderly Runagians were as poor as they had ever been when the program started, increasing their pension should have improved their circumstances to some extent. This doesn't explain their unimproved condition. Eliminate.

E. In Runagia children typically supplement the income of elderly parents, but only by enough to provide them with a comfortable living

This indicates that the amount Runagian children give their parents depends on how much income their elderly parents have. This means that if the government started giving elderly Runagians more pension money, their children would give them less money, so that elderly Runagians end up with the same amount of money as before - the only difference is that more of it came from the government, and less of it came from their children. This explains why elderly Runagians aren't doing any better financially! As soon as their income increased in one area, it decreased in another. Correct.