The Advocacy on Monetary Policies for Economic Justice – A Handbook for civil society uncovers these false assumptions, showing that monetary policies are crucial in determining government budgets and fiscal space for essential services and that they are not driven by merely technical considerations but also involve political choices.

The handbook is the outcome of a project led by ActionAid International, Eurodad, INESC (Brazil), SEATINI and CEHURD (Uganda), SIKKA (Tanzania), and WEMOS, aimed at exploring ways to increase civil society engagement in the monetary policy arena. It intends to provide the basic tools to economic justice activists and organisations for understanding how monetary policies work and how they interact with the economy.

This handbook was conceived and written at the height of the Covid-19 pandemic in 2021, during which the global economy was under a lot of stress and countries were facing growing 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 sustain their growing expenditure. As debt levels exploded, the alarm was raised for a new wave of contractionary fiscal policies. At the same time, inflationary pressure started 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 have to follow suit, as well as face rising borrowing costs on 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 ahead. 

As the handbook was finalized, Russia invaded Ukraine, and the global economy fell into a new, 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 across many low- and -middle income countries. According to estimates from the World Bank, an additional 75–95 million people will be pushed into extreme poverty in 2022. The risk of a wave of debt crisis across poor and emerging economies is more concrete than ever, as central banks have started to increase interest rates to cool inflation. UNCTAD has warned that the combination of weakening global demand, insufficient policy coordination at the international level and elevated debt levels from the pandemic can push some low- and -middle income countries into a downward spiral of insolvency, recession and arrested development.

Even without such a dramatic spiral, many low- and -middle income countries are going to face limited fiscal and policy space and difficult economic policy choices. It is more important than ever that civil society is ready to scrutinize, assess and influence these choices to ensure they do not lead to severe cuts in public spending that would hurt the poorest people the most, deepen inequality and further delay achieving the Sustainable Development Goals (SDGs).