Drivers of Disparity: How Policy Responses to COVID-19 can Increase Inequalities

Countries across the world have deployed macroeconomic policies to address the negative economic implications of the COVID-19 pandemic and subsequent lockdown measures. However, these policies can have different outcomes for various segments of the population. This policy briefing assesses the channels through which macroeconomic policy responses in Nigeria and Uganda negatively affect or exclude specific groups, with the aim of resetting policies to achieve more inclusive outcomes that will support economic growth and development in the post-COVID future. It finds that the urban poor and the informal sector are being excluded as a result of the poor coverage of cash transfer programmes and the implementation of policies mostly applicable to the formal sector. Loans to low-income borrowers are not likely to increase despite downward revisions to the monetary policy rate, while importers and poorer households will be the worst hit by exchange rate adjustments in Nigeria. While the middle class and rich are affected by the removal of subsidies in Nigeria, those living in poverty do not benefit from the budget restructuring in Uganda.