At a time when the world is facing challenges from rapid technological advances, demographic shifts, and climate change, there is rising disengagement from the system of global cooperation and economic integration, which has delivered enormous benefits during past decades. The imperative for policymakers is to reorient domestic and international policies to mitigate the adverse economic and social consequences of international integration and technological advances on vulnerable groups.
Policies must provide conditions at home for people to succeed. This is especially true for emerging market and developing economies, where the challenge is to provide gainful employment for their large young populations. In many of these economies, up to 20 percent of working-age young people are neither employed, in school, nor in training. Bringing down youth inactivity rates to those in advanced economies would boost output by 5 percent. Beyond measures that improve labor marker flexibility and job quality, policies that support overall demand and economic activity are key.
Restoring trust in government and institutions requires policy frameworks that enhance inclusion and opportunities for all. Tackling corruption and sources of inequality is key. IMF research has shown that less corrupt governments collect 4 percent of GDP more in tax revenue than countries at the same level of development with the most corruption. This means more resources for schools, roads, and hospitals. Policies are also needed to strengthen market competition and share the benefits from trade and technology more equally.
The IMF has taken stock of its work on inequality in pilot countries. Policy dialogue has been broadened to assess the impact of inequality on growth and examine the distributional impact of policies and reforms. Similarly, taking stock of IMF engagement on gender equality suggests that gender issues are macrocritical at the country and cross-country levels and are becoming an integral part of capacity development.
Stronger joint action is essential to confront broader challenges that countries cannot manage alone and to support countries’ efforts to achieve the United Nations Sustainable Development Goals (SDGs). IMF work suggests that delivering on the SDG agenda on human, social, and physical investment calls for additional spending in 2030 of $0.5 trillion for low-income developing countries and $2.1 trillion for emerging market economies. The IMF will continue to help countries meet the 2030 SDGs through deeper policy diagnostics and capacity development and will help design strategies for financing from different sources, including domestic revenue mobilization, foreign aid, and the private sector.
Confronting the financing gap
For low-income developing countries, tax revenue will be insufficient to finance SDGs; other sources of financing will be needed. (Billions of 2016 US dollars)
Notes: Additional spending refers to the additional annual spending across low-income developing countries required in 2030 for meaningful progress on the SDGs in the areas of health, education, roads, electricity, water, and sanitation.
Sources: IMF staff calculations using Gaspar and others, 2019.
