## Inequality and Macro Policy

_IMF News, April 28, 2022_

## Source details

**Canonical URL:** [Inequality and Macro Policy](https://www.imf.org/en/news/articles/2022/04/28/sp042822-inequality-and-macro-policy-dmd-sayeh)

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## Bibliographic details
- Published: April 28, 2022

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### Current situation on inequality
- Rising inequality was a concern before the pandemic; the pandemic has exacerbated pre-existing inequalities within countries and across countries.
- Within countries: young, informal workers and women have borne the biggest brunt.
- Across countries: low income and fragile countries are lagging even more than before.
- Russia’s invasion of Ukraine is described as "another crisis on top of a crisis" and "a massive setback for the global economy."
- "Rising food and energy prices are affecting poor households more as they spend a larger portion of their income on these two items."
- Low-income developing countries have less scope to respond because "the pandemic already reduced their fiscal space, and they are now confronted with elevated debt levels and tighter financial conditions."
- Issues of amplified inequality and social tensions were central in discussions at the Spring Meetings.

### Immediate policy priorities
- Two near-term tradeoffs for policymakers:
  - Reducing inflation is essential—"it is after all a tax on the poor." Central banks need to take decisive actions to reduce inflation while safeguarding the recovery.
  - Fiscal policy trade-off: as policymakers rebuild fiscal buffers, they must ensure continued support for the vulnerable amid rising food and energy prices.
- Policy design recommendations to "square this circle":
  - Anchor policies in credible medium-term fiscal strategies.
  - Mobilize additional revenues while "paying due regard to the distributional consequences of tax reforms."
  - Rationalize and reprioritize spending, while providing well-targeted support for the vulnerable.
- Role of international community where country capacity is limited:
  - Support ranges from helping to restructure debt, to maintaining access to liquidity, and providing financing and grants.
  - Applies when "the current environment creates large fiscal and external financing needs," policy space is limited, "including because of unsustainable debt burdens," and rapid adjustment would be too costly.

### Long-term policy priorities
- Need for reforms and strong institutions to increase resilience to shocks and address underlying drivers of inequality.
- Comprehensive approach required across various aspects of inequality: income, gender, health, and economic opportunity.
- Fiscal policy—focus on both pre-distributive and redistributive measures:
  - Pre-distributive: level the playing field before people enter the labor market through public education, health services, and basic infrastructure.
  - Redistributive: correct inequalities through progressive income tax and social assistance to help people cope with life events.
- Gender-inclusive policies:
  - In advanced economies: help women balance work and family through parental leave, affordable childcare and tax systems that don’t penalize the second earner.
  - In low-income countries: improve access to health, education, finance—and invest in infrastructure such as safe water and transportation.
- Opportunities from digitalization and climate action:
  - Digitalization can facilitate access to finance, social assistance, and deliver income support.
  - Shift to climate-resilient infrastructure is key because the poor are often more vulnerable to extreme climate events.
- Support for workers in transition:
  - Invest in training, re-skilling and high-quality education to unlock potential of green and digital economies and spread benefits more widely, including to vulnerable segments.
- These areas are central to the IMF’s surveillance, lending and capacity development activities.

*Opening Remarks at the 2022 Global Empowerment Meeting by Deputy Managing Director Antoinette M. Sayeh (At Harvard Kennedy School’s Center for International Development, April 28, 2022).*

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## References

- [https://www.imf.org/en/about/senior-officials/bios/antoinette-monsio-sayeh](https://www.imf.org/en/about/senior-officials/bios/antoinette-monsio-sayeh)
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- [Ukraine and the IMF](http://www.imf.org/external/country/UKR/index.htm)
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_Source: https://www.imf.org/en/news/articles/2022/04/28/sp042822-inequality-and-macro-policy-dmd-sayeh_