Opening remarks during the High Level Policy Dialogue on Inequality
By Deputy Director General Antoinette M. Sayeh
September 20, 2022
Thank you very much, Sukhwinder, for that kind introduction, and thank you all for joining us. A very good morning or afternoon to all, depending on where you are.
It is with great pleasure that I open this important very timely event on inequality.
As we all know, our world today faces multiple challenges, ranging of increased geopolitical fragmentation, growing sovereign debt concerns in many countries and a cost of living crisis in virtually every country. These challenges create an even greater urgency for policymakers to address issues related to reducing growing inequalities.
And this is particularly true for sub-Saharan Africa. Even before the COVID-19 pandemic, inequality within African countries was the second highest in the world after Latin America. The pandemic has exacerbated these pre-existing inequalities in several ways.
First, within countries. We know that the pandemic has disproportionately affected low-skilled workers in the informal sector, particularly in the service sector, with women and young people being the most affected. Second, inequality has also increased Between the countries in the region, depending on their degree of resilience and their ability to react to the shock. Finally, sub-Saharan Africa is expected to recover from the pandemic more gradually than the rest of the world.
Adding to the pandemic, soaring food and energy prices resulting from Russia’s war in Ukraine have further aggravated these inequality. Food insecurity is of particular concern concern because food represents a larger proportion of the consumption basket of low-income households and food insecurity was increasing before the current crisis, with at least 35 million people in Africa becoming acutely food insecure over the past two years.
In the near future, the effects of frequent climatic shocks will further amplify this divide. In fact, sub-Saharan Africa is the region of the world most vulnerable to the effects of climate change, with the majority of the population living in rural areas and dependent on weather-sensitive activities such as rain-fed agriculture.
Lasting inequalities can also leave lasting scars and undermine economic, social and political stability. For example, schools in sub-Saharan Africa have been closed for much longer than in advanced economies, which has contributed to widening the learning achievement gap and weighed on medium-term growth. We know that the effect of school closures is stronger for children from poorer households and girls, who are at higher risk of dropping out. This growing inequality in access to education is likely to slow intergenerational mobility and perpetuate the divide within countries.
So, in summary, the divergent paths to recovery between Africa and the rest of the world, and within African countries, can lead to permanent fault lines, jeopardizing decades of hard-won progress in poverty reduction. and gender disparities and making it increasingly difficult to achieve the SDGs. hard.
This is why we must act now.
And I am very happy that we have come together today to discuss policy options to that end. There is of course no one size fits all everything, but I will emphasize three main principles that I urge you to take into account when designing policies to tackle inequality.
Firstly, in the current difficult context, we must ensure continued support for the most vulnerable. Recent shocks confirm the importance of strengthening countries’ social protection systems. All over the world we have seen evidence positive impact and profitability social protection interventions that contribute to poverty reduction, human capital development, job creation and resilience to shocks.
Tomorrow’s discussion will clearly show that several African countries have made significant progress and innovation in strengthening their social protection systems, including during the pandemic. But there is still a lot to do. And as we recover from shocks, any new strategy to foster long-term sustainable and inclusive growth must prioritize the immediate needs of the most vulnerable.
Second, reducing inflation is essential, because inflation is, after all, a tax on the poor. The current inflation spike we are seeing in the region is mainly driven by external factors, namely high global food and fuel prices and supply-side disruptions, some of which pre-date the crisis. Where monetary tightening of the policy is necessary, it is important strengthen monetary policy frameworks to ensure the effectiveness of policy measures.
Third, countries must pursue reforms to build resilience to shocks and address the underlying drivers of inequality. There are various aspects of inequality – income, gender, health, economic opportunity – all of which are intertwined and mutually reinforcing. Thus, policy makers will need a approach. Fiscal policy has a key role to play. For example, predistributive policies can help level the playing field before people enter the labor market, through the provision of public education, health services and basic infrastructure. And redistributive policies help correct inequalities, for example, through progressive income taxes and social assistance to help people cope with life events. Digitization can also help, as we will see in tomorrow’s conference, in particular by facilitating access to finance and the effective provision of income support.
Of course, I fully recognize that in the current context difficult economic environment, many countries will not be able to meet their needs alone. The international community has a key role to play in reducing inequalities. And that includes the IMF.
Since the beginning of the pandemic, the Fund we moved quickly to expand our financial support, including through the allocation of $650 billion in SDRs, and we facilitated additional debt relief. The IMF is preparing to roll out its new long-term financing instrument, the Resilience and Sustainability Facility, to help countries build resilience to climate change and future pandemics.
We have also begun to integrate gender into our core surveillance, lending and capacity development activities – and our board recently approved a gender strategy to further integrate gender into our work. Indeed, we recognize that reducing gender disparities goes hand in hand with higher economic growth, greater economic stability and resilience, and lower income inequality.
The IMF is also strengthening its analysis, policy advice, and training on inequality and inclusive growth. But I’m sure we can do more. In these difficult times, defining effective and coherent strategies to reduce inequalities is crucial, and to do this, we must listen to each other.
I look forward to hearing the results of the conference discussions and suggestions on how the IMF can best help our member countries better address inequality. Thanks a lot.
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