When Economic Stability Fails to Protect Against Poverty

By Ahmad Awad

The annual meetings of the International Monetary Fund (IMF) and the World Bank in Bangkok brought the issue of jobs into direct confrontation with the priorities of financial and monetary stability. While World Bank President Ajay Banga focused on mobilizing investment to address the employment gap, IMF Managing Director Kristalina Georgieva emphasized the need to control debt and inflation. Between these two priorities lies a fundamental question: to what extent can the proposed policies improve people's incomes and prevent more of them from falling into poverty?

Banga warned that approximately 1.2 billion young people would reach working age over the next 10 to 15 years, while only around 400 million jobs are expected to be created in the developing world. Georgieva stressed that the resilience of the global economy is under pressure from debt, energy challenges, and technological transformations. Both messages reflect an awareness of the scale of existing imbalances, but they also call for a reassessment of the tools that have helped shape development trajectories and the distribution of their benefits.

The challenge goes beyond the number of jobs to their economic and social value. Slowing growth limits employment expansion, while the prevailing model of economic growth allows production and profits to increase without corresponding improvements in wages. When low labor costs become the basis for attracting investment, precarious jobs proliferate, and inadequate incomes become a persistent feature of the labor market. At that point, employment loses its ability to protect workers from poverty.

In non-oil-exporting Arab countries, the problem is reflected in the fact that the wages of most salaried workers are insufficient to secure a decent life for themselves and their families. This issue extends beyond narrow monetary poverty lines to the ability to afford housing, food, education, healthcare, and transportation, and to cope with emergencies without borrowing or depleting savings. Measuring policy success solely through employment rates therefore conceals the reality of households whose members work but remain unable to meet their basic needs.

Artificial intelligence further complicates this equation. Advanced economies are better positioned to invest in digital infrastructure, research, and skills, while countries of the Global South, including most Arab countries, face financing constraints, debt burdens, and weak public services. Both the IMF and the World Bank acknowledge that disparities in technological readiness could widen gaps between countries. Within countries, gains may also become concentrated among large corporations, owners of capital, and highly skilled workers unless policies intervene to distribute the benefits of productivity growth.

Accordingly, it is not enough to present technology as a driver of growth or training as a comprehensive response to changes in employment. What is needed are interconnected production, education, and labor policies that support local enterprises, expand the productive use of technology, and ensure that part of its gains is translated into higher wages and improved social protection. Otherwise, productivity may accelerate in a limited number of sectors while low-paid employment expands throughout the rest of the economy.

The priorities of financial and monetary stability also raise the question of how costs are distributed. There is no disagreement that high inflation and unsustainable debt undermine development. However, reducing deficits through consumption taxes, wage restraint, and cuts to public spending produces different outcomes from addressing them through effective progressive taxation, combating tax evasion, reviewing exemptions, and improving spending efficiency. The first approach puts pressure on demand and living standards and may weaken the economic activity that is supposed to support fiscal sustainability.

Likewise, the effects of monetary tightening in major economies are transmitted to countries of the Global South through higher financing and debt-servicing costs. These countries find themselves under pressure to reduce spending precisely when they need greater investment in production, skills, and services. Responsibility for addressing debt should therefore be shared among governments, creditors, and international institutions through early debt restructuring, expanded concessional financing, and the protection of social and productive investment.

These challenges require the World Bank and the IMF, as the two international financial institutions with the greatest influence over development trajectories and the global economy, to reconsider their programs and the conditions attached to their interventions. Preventing more people from falling into poverty should become an explicit, measurable objective alongside deficit reduction and investment mobilization. This requires assessing the effects of programs on wages, disposable income, services, and inequality before their adoption and throughout their implementation.

It also requires moving beyond reliance on assistance schemes targeted at the poor toward supporting the development of comprehensive social protection systems based on the social protection floors framework. This approach seeks to guarantee access to essential healthcare and income security throughout the life cycle, while progressively expanding coverage to include workers in the informal economy and groups excluded from existing systems. Effective protection begins before income is lost and living conditions deteriorate.

The required measure of success is clear: jobs that provide adequate wages, quality public services, and social protection that reduces risks and prevents impoverishment. On this basis, the two institutions can help narrow disparities between advanced economies and the Global South, as well as inequalities within countries. Continuing to separate financial stability from people's economic security, however, will leave economies with fragile accounting balances and societies less capable of withstanding shocks.