Enhancing the redistributive role of fiscal policy in developing countries

While income inequality has increased in many countries worldwide over recent decades, high-income countries have been able to tackle high inequality better than developing countries. A key factor in explaining this difference is the greater redistributive impact of fiscal policy in high-income countries.

The challenge in developing countries is to enhance the redistributive role of fiscal policy, while also promoting growth and maintaining fiscal sustainability. This requires strengthening the resource mobilization capacity of governments. But it equally requires the development of more comprehensive social protection systems, including better-targeted safety net programs.