The Monetary Policy Advocacy for Economic Justice – A Manual for Civil Society reveals these false assumptions, showing that monetary policies are key in determining public budgets and fiscal space for essential services and that they are not driven by mere technical considerations, but also involve political choices.
The handbook is the result of a project led by ActionAid International, Eurodad, INESC (Brazil), SEATINI and CEHURD (Uganda), SIKKA (Tanzania) and WEMOS, aimed at exploring ways to increase community engagement civil society in the arena of monetary policy. It aims to provide the basic tools for economic justice activists and organizations to understand how monetary policies work and how they interact with the economy.
This handbook was designed and written at the height of the Covid-19 pandemic in 2021, during which the global economy was under severe strain and countries faced increasing spending needs. Unlike high-income countries, most low- and middle-income countries had limited fiscal space and many had to resort to borrowing from the IMF to support their growing spending. As debt levels exploded, the alarm has been sounded for a new wave of restrictive fiscal policies. At the same time, inflationary pressures began to mount in rich and poor countries alike, and the prospect of monetary tightening by the US Federal Reserve and the European Central Bank (ECB) became more concrete. The risk that many low- and middle-income countries would be forced to follow suit and face rising borrowing costs in international financial markets was evident. In this context, it seemed important to equip civil society organizations with a better understanding of monetary policy and its interaction with fiscal policy to help them defend public spending in the difficult years of austerity that are coming. announce.
When the manual was finalized, Russia invaded Ukraine and the world economy fell into another dramatic crisis, triggering a sharp rise in food and energy prices – straining the fiscal and external balances of commodity-importing countries and increasing food security concerns in many low- and middle-income countries. According to World Bank estimatesAn additional 75 to 95 million people will be pushed into extreme poverty by 2022. The risk of a wave of debt crisis in poor and emerging economies is more concrete than ever, as central banks have started raising interest rates to curb inflation. UNCTAD warned that the combination of weakening global demand, insufficient policy coordination at the international level and high debt levels due to the pandemic may push some low- and middle-income countries into a downward spiral of insolvency, recession and halt in development.
Even without such a dramatic spiral, many low- and middle-income countries will face limited fiscal and policy space and difficult economic policy choices. It is more important than ever that civil society is prepared to examine, assess and influence these choices to ensure that they do not lead to severe cuts in public spending that would hurt the poorest the most, deepen inequalities and would further delay the achievement of the Sustainable Development Goals. (ODD).