africa is around 0. 7, which makes it one of the most unequal countries in the world, and certainly the most unequal large country. see global inequality by branko milanovic ( 2016 ), especially chapter 3, titled ‘ inequality among countries : from karl marx to frantz fanon, and then back to marx? ’. page 4 of 15 inequality in south africa south africans know that theirs is an extremely unequal country. however, there are some aspects of this inequality which are not well understood. one is that inequality is no longer as completely determined by race as it used to be. historically, of course, inequality in south africa was fundamentally a racial story, with access to economic as well as political rights and opportunities based on skin colour. since the end of apartheid, however, this has begun to change. 3 inequality within the african portion of society has risen, as some black people have moved into the middle and upper classes while others have stayed very poor. as a result, inequality among black people is higher than for the other racial categories in south africa. 4 the gini coefficient among africans is above 0. 6 – about the same as botswana, and close to lesotho and swaziland – countries which are less racially diverse than we are but still very unequal. another aspect of inequality that people tend to get wrong is the contribution of monetary policy. i am often struck by the comment that higher inflation reduces inequality by benefiting poorer south africans. the core of this argument is that higher inflation creates more jobs that go to poorer people. leibrandt et al. ( 2010 ), employment and inequality outcomes in south africa, p. 21, available at https : / / www. oecd. org / employment / emp / 45282868. pdf. as of 2016 data, the gini coefficient for the black population in south africa was 0. 65. it was 0. 58 for coloured south africans, 0. 56 for indians / asians, and 0. 51 for whites. the number for south africa as a whole was 0. 68. page 5 of 15 another part of the argument is that – because most households are highly indebted, and because poorer households are the most indebted – interest rate cuts will disproportionately improve the welfare of those people. i would like to assess those arguments, as well as a couple of other monetary policy channels that are less discussed, in an effort

to slower private consumption in the early months of 2010. private investments have provided a negative contribution to economic growth. the historical low of the free capacity utilization, the worsened figures of business confidence, the contraction of the import of intermediate and capital goods and the slowdown in credit suggest that investments were low during this period. on the other hand, the slight recovery of credit for investment purposes and the increase in the imports of intermediate goods in the first months of the second quarter of 2010 may signal a possible shift of this aggregate demand component in the second quarter of the present year. the public sector continued to pursue a stimulating fiscal policy in the first five months of 2010. budget deficit amounted to all 11. 6 billion, owing to the annual growth of budget revenue by 4 percent and the annual contraction of public spending by 3 percent. after careful monitoring of the current and expected economic performance and its implications for fiscal indicators, the bank of albania considers that fiscal policy should be watchful at keeping the budget deficit and public debt levels in check. keeping the budget deficit within sound parameters increases confidence in the long - term sustainability of public debt, hence lowering the risk premiums in the financial markets. in addition, the lowering of pressures in the domestic financial markets helps to keep the longterm interest rates in check, hence facilitating the private sector access to the credit market. therefore, the projected revision to the 2010 state budget needs to be based on a realistic budget revenue plan, making at the same time projections of the required correction measures for the reduction of public spending and control of budget deficit. net exports increased their positive contribution to aggregate demand in the first four months of 2010. this performance was triggered by the annual increase of exports by 47 percent, while imports were comparable to the previous year. hence, in the first four months of the present year, trade deficit narrowed further by 14 percent y - o - y. in addition to the positive impact on economic growth, this necessary correction aided the stability of the national currency. lek ’ s exchange rate was more stable and less volatile during this period. the performance of other balance of payments items in the first quarter of the present year attests to the significant reduction of foreign financing. remittances declined 6. 7 percent, hence financing only 40. 6 percent of the trade deficit. despite the positive performance of foreign direct investments, posting an annual growth of 26 percent, the surplus in capital and financial account financed only 41. 2 percent of the current deficit.