Publications of the FoundationInequality reduction and debt sustainability analysis
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  • This paper proposes a practical approach to incorporate national inequality-reduction efforts into the practice of debt sustainability analysis (DSA). It establishes why it would be beneficial to include inequality reduction into DSAs and how it would enhance IMF and World Bank contributions to reducing poverty and inequality (SDGs 1 and 10). It then demonstrates the feasibility of this proposal by identifying applicable countries, estimating spending needs and inequality impacts, and calculating multiplier effects on growth and tax revenues. With these building blocks, the case to the IMF and World Bank for adapting their sovereign debt frameworks (the SRDSF and LIC-DSF) to include anti-inequality spending and policies is clear. The current LIC-DSF review should lead this reform: enhancing contributions to reducing poverty and inequality, accelerating growth, and enhancing macro stability. Given current challenges for international cooperation at the global level, practical approaches such as these are a way to keep making progress on global goals.