IMF Warns of Social Unrest, Trust Erosion as Inequality Worsens

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The International Monetary Fund warned that inequalities which have been exacerbated by Covid-19 may lead to polarization, erosion of trust in government and social unrest.

“These factors complicate sound economic policy making and pose risks to macroeconomic stability and the functioning of society,” the Washington-based fund said in a report released Thursday. “Governments need to provide everyone with a fair shot.”

Income inequality has worsened over the past three decades, more so in advanced and large emerging-market economies. Ninety five million people entered extreme poverty last year, according to the report. The pandemic weakening public finances and many countries will need to raise additional revenues and spend money more efficiently, the IMF said.

IMF Managing Director Kristalina Georgieva on Tuesday said the fund expects a “multi-speed” recovery because economic fortunes are diverging.

The IMF recommended policy makers consider steps to address rising inequalities including reforming tax policy and bolstering social-safety nets like health care and education. These reforms aren’t cheap: it would cost $3 trillion for 121 emerging-market economies to provide basic services, the IMF said.

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