The International Monetary Fund (IMF) has urged Philippine officials to address income inequality in the country, saying the essence of boosting growth of an economy lies with the government’s ability to create more jobs and pull people out of poverty.
According to visiting IMF officials, the poor must reap the benefits of an expanding economy—a challenge now facing the Philippine government.
The country is growing by a relatively decent pace of about 5 percent a year, but growth does not appear to be trickling down to those living below the poverty line.
Vivek Arora, IMF mission chief to the Philippines, said in a press conference that efforts of policymakers in the country should be geared toward both accelerating growth of the economy and making the poor experience the benefits of a growing economy.
Some experts noted that while the domestic economy is expanding, the pace of growth does not appear to be fast enough to reduce poverty, while the benefits of growth are not being felt by the poor.
The experts cited how a quarter of the population still live below the poverty line.
“The Philippines has to address the twin challenge of [accelerating] growth and making it more inclusive,” Arora said.
Anoop Singh, IMF director for Asia and the Pacific, said in the same conference that addressing the challenge of reducing income inequality, particularly by providing jobs to the unemployed and individuals belonging to poor households, would require rechanneling of public resources to vital areas.
For instance, Singh said, the government could reduce tax incentives granted to some business sectors and use the savings to increase funds for conditional cash transfers (CCT) for the poor.
Under the Conditional Cash Transfer program of the government, the poorest households will be given monthly food subsidies.
Recipients are required to send children to public schools while the women of the households must regularly visit public health centers.
Singh said additional public spending on social safety nets, such as public education, will help the country attain its goal of poverty reduction. Educating the poor will give them better chances of getting employed and augmenting their incomes.
The IMF officials also said the government should intensify
efforts at attracting more foreign direct investments, which they said are necessary to generate more jobs and lift income levels.
They said attracting more foreign direct investments would also help protect the Philippines from the ill effects of a poorly performing global economy.
Weak global demand has reduced the income of Philippine exporters, dragging down overall growth. The IMF said strengthening the domestic economy, such as by attracting more investments, would help the country better weather the impact of any global crisis.