The IMF is offering a prescription of fiscal policies to promote inclusive growth and combat income inequality that remains despite a strengthening global economic recovery.
While global inequality has declined in recent decades, the just-released Fiscal Monitor report from the IMF finds that inequality within countries has been rising and suggests fiscal policies can be a powerful tool.
“The economic recovery is gaining pace and it’s widespread all over the world. That provides a global window of opportunity to engage in structural reform and address long-standing imbalances. Fiscal policy should avoid pro-cyclicality, should address excessive debt and should build buffers and tax capacity that will enable it to fully play its role,” said Vitor Gaspar, IMF Director of the Fiscal Affairs Department.
Gaspar called on policymakers to use fiscal policy to prioritize countering income inequality.
“Inclusive growth should be right at the top of the policy agenda. The Fiscal Monitor documents that fiscal policy is a powerful tool and can make a difference. And we also show that it is possible to go for inclusion and foster sustainable growth at the same time,”
Gaspar noted that conditions within individual countries must be taken into account for any policy prescriptions.
“The Fiscal Monitor is about tackling inequality. It engages in three main policy debates: progressive taxation, universal basic income and spending in health and education. We collect facts and arguments that will help politicians and policymakers to make the right choices for their countries.”
A full copy of the report can be found at IMF.org.