IMF must drop austerity demands as cost of living crisis drives up global hunger and poverty
87% of International Monetary Fund (IMF) COVID-19 loans require developing countries that have been denied equal access to vaccines and are facing some of the world’s worst humanitarian crises to adopt new harsh austerity measures that will further exacerbate poverty and inequality.
New analysis from Oxfam finds that 13 out of 15 IMF loan programs negotiated in the second year of the pandemic require new austerity measures such as food and fuel taxes or spending cuts that could jeopardize vital public services. The IMF is also encouraging six other countries to adopt similar measures.
In 2020, the IMF deployed billions in emergency loans to help developing countries cope with COVID-19, often with few or no strings attached. Recently, IMF chief Kristalina Georgieva urged Europe not to jeopardize its economic recovery with “the suffocating force of austerity”. Yet over the past year, the IMF has resumed imposing austerity measures on low-income countries.
“It illustrates the double standard of the IMF: it warns rich countries against austerity while forcing it on poorer ones. The pandemic is not over for most of the world. Rising energy bills and food prices affect poor countries the most. They need help to improve access to basic services and social protection, not the harsh conditions that plague people when they are cut down,” said Nabil Abdo, Senior Policy Advisor at Oxfam International.
Kenya and the IMF have agreed a $2.3 billion loan package in 2021, which includes a three-year public sector wage freeze and an increase in cooking gas and food taxes. More than 3 million Kenyans face acute hunger as the driest conditions in decades have spread a devastating drought across the country. Almost half of all households in Kenya have to borrow food or buy it on credit.
9 countries, including Cameroon, Senegal and Suriname, are required to introduce or increase the collection of value added taxes (VAT), which often apply to everyday products such as food and clothing, and disproportionately affects people living in poverty.
Sudan, where nearly half the population lives in poverty, has been forced to scrap fuel subsidies, which will hit the poorest the hardest. The country was already reeling from international aid cuts, economic turmoil and rising prices for basic commodities such as food and medicine before the war began in Ukraine. More than 14 million people need humanitarian aid (nearly one in three people) and 9.8 million are food insecure in Sudan, which imports 87% of its wheat from Russia and Ukraine.
10 countries, including Kenya and Namibia, are likely to freeze or cut public sector wages and jobs, which could mean lower quality education and fewer nurses and doctors in countries already short of personal health. Namibia had fewer than six doctors per 10,000 people when COVID-19 hit.
New analysis from Oxfam and Development Finance International (DFI) also released today finds that 43 of the 55 African Union member states will face public spending cuts totaling $183 billion over the next five years . If these reductions are implemented, their chances of achieving the UN Sustainable Development Goals will likely disappear. In 2021, an Oxfam study of IMF COVID-19 loans showed that the Fund encouraged 33 African countries to pursue austerity policies in the aftermath of the health crisis. The pandemic is not over, but these policies are already taking shape across Africa.
The analysis also shows that the failure of African governments to tackle inequality ― by supporting public health care and education, workers’ rights and a fair tax system ― has left them woefully ill-equipped to tackle poverty. COVID-19 pandemic. The IMF has contributed to these failures by consistently pushing a policy agenda that seeks to balance national budgets through cuts to public services, increases in taxes paid by the poorest, and measures to undermine labor rights and protections. . As a result, when COVID-19 hit, 52% of Africans had no access to healthcare and 83% had no safety nets to fall back on if they lost their jobs or fell ill.
“The IMF should suspend austerity conditions on existing loans and increase access to emergency financing. It should encourage countries to raise taxes on the wealthy and corporations to replenish depleted coffers and reduce growing inequality. That would actually be good advice,” Abdo said.
Notes to Editors
Download Oxfam’s in-depth IMF Lending Dataset and Blog, as well as the “Commitment to Reducing Inequalities Index: Africa Briefing”. Our analysis of IMF COVID-19 lending in the first year of the pandemic is also available for download.
Oxfam estimates that more than a quarter of a billion more people could fall into extreme poverty levels in 2022 due to COVID-19, rising global inequality and the shock of rising food prices accentuated by the war in Ukraine. For more information, download Oxfam’s brief “First crisis, then catastrophe”.
The IMF negotiated 22 COVID-19 loans with 23 countries between March 15, 2021 and March 15, 2022. 15 are loan programs with a full set of conditionalities or policy requirements, six are emergency financing without conditionality and one is a flexible line of credit. which generally does not include conditionalities. The US$1.4 billion (SDR 1,005.9 million) disbursement from the IMF to Ukraine was not included in Oxfam’s analysis, as it was intended to meet urgent financing needs and mitigate the economic impact of war.
In December 2021, IMF Managing Director Kristalina Georgieva told Euronews that the European Union should not put economic recovery at risk with “the suffocating force of austerity”. The IMF’s own research shows that austerity worsens poverty and inequality.
Photographs and videos from East Africa are available. As many as 28 million people in East Africa are at risk of extreme hunger. West Africa is facing its worst food crisis in ten years, with more than 27 million people suffering from hunger.
According to the latest Sudan household survey (2014), 44% of the population lives in poverty. However, these data do not reflect the impacts of recent economic decline, high inflation and recent flooding. The IMF estimates that the current economic crisis, exacerbated by COVID-19, is likely to have significant negative effects on living conditions and poverty.
According to the World Food Programme, 9.8 million people in Sudan are food insecure. An estimated 14.3 million people will need humanitarian assistance in 2022, the highest figure in the past decade.
According to the World Bank, Namibia had 0.59 doctors per 1,000 people before the start of the pandemic.