Why gender equality is macro-critical

IN A world grappling with multiple crises, the imperative to achieve gender equality has become even more pronounced. Public institutions, including central banks, should be at the forefront of this effort, but they often fail to rise to the occasion.

Gender disparities – in opportunities, outcomes and levels of representation – have detrimental effects on both micro- and macroeconomic indicators. The Official Monetary and Financial Institutions Forum’s (OMFIF) 2024 Gender Balance Index (GBI) shows that only 16 per cent of the 335 institutions in the index are led by women.

According to Monique Newiak, deputy chief of the inclusion and gender unit at the International Monetary Fund (IMF), “gender gaps are simply a misallocation of resources”. Any frictions that create different opportunities for women and men lead to a misallocation of human capital and productive resources as well as having an impact on growth, economic diversification and businesses’ profits.

Minding the gender gap

Typically, gender gaps tend to evoke examples of labour force participation disparities and wage discrepancies. However, the reality is far more multifaceted, and the actions to mitigate this need to be tailored accordingly.

While advanced economies often grapple with gender gaps in the labour market, emerging and developing economies face a broader spectrum of inequalities – including disparities in educational opportunities and access to financial resources.

Gender-based violence remains a pressing issue globally. To tackle this, IMF country teams are delving into the challenges specific to each nation. Newiak pointed to an increasing focus on gender-responsive budgeting within fiscal frameworks, expansion into different areas such as structural policy advice, and analysis of how monetary policy is impacting gender gaps.

These efforts are in line with IMF’s gender strategy, which aims to integrate gender into all the core functions of surveillance, regular policy dialogue with member countries, lending, and capacity development.

In the two years since adoption, a gender lens has been applied in a quarter of the 190 countries the IMF serves with policy advice. This is just the start. But the fund is looking to increase country coverage and increase the depth of analysis supported by data and analytical tools, which it plans to make accessible to member countries and external stakeholders, Newiak added.

Looking inwards

The IMF also stands to benefit from looking inwards and reflecting on gender parity in its own ranks. A 2023 IMF paper, Who are Central Banks? Gender, Human Resources, and Central Banking, found that, on average, international financial institutions (IFIs) – which include the Organisation for Economic Co-operation and Development, World Bank and IMF – outperform Group of Seven (G7) central banks in various measures of gender equality.

This holds true for both qualitative (diversity policies, leave and work arrangements, and childcare benefits) and quantitative aspects of gender equality, based on new survey evidence from human resources departments.

Mariarosaria Comunale, economist at the IMF, noted that over 40 per cent of the managerial roles (lower, middle or senior management) in IFIs are held by women, while this figure is closer to 30 per cent in the central banks the survey covered. IFIs also outperform their central bank counterparts on the gender pay gap. Comunale added: “Among the top 20 per cent (of) earners in central banks, only 27 per cent are women, while in IFIs, we are closer to 31 per cent.”

While most G7 central banks offer parental leave, childcare and related subsidies are limited, and gendered occupational segregation is still present. Comunale also observed that, behind these averages, the institutions are quite heterogeneous in aspects related to gender equality.

The relatively poor performance of central banks aligns with the findings from the GBI more broadly. This year, 16 per cent of central banks are led by women – which is the highest since the inception of the index – but there are signs that progress is slowing.

Only a net 10 per cent of central banks witnessed an increase in their GBI scores this year. While this is marginally higher than 9 per cent in 2023, it is much lower than the net 14 per cent that saw scores increase in 2022, or net 18 per cent in 2021.

The IMF’s initiatives, as well as other central bank strategies to mainstream gender considerations into its operations, represent a significant step forward. But concerted efforts from all stakeholders are needed to ensure meaningful progress towards gender parity in the financial sector and beyond.

This was also echoed by Newiak, who stated that “gender is macro-critical. It is worth addressing in its own right, but without gender equality, economies will have a very hard time prospering”.

By advancing gender-responsive policies and harnessing collective action, we can unlock the full potential of human capital and build a more equitable and resilient global economy. OMFIF

The writer is a senior research analyst at OMFIF.