The International Monetary Fund’s new austerity measures for the loans provided to developing countries, leading to an increase of poverty, hunger and inequality, has been widely deplored. Financial experts maintain that a series of public services would be at risk because of these measures.
In a new analysis, Oxfam finds that 13 out of the 15 IMF loan programs negotiated during the second year of the pandemic that required new austerity measures such as taxes on food and fuel or spending cuts that could put vital public services at risk. The IMF is also encouraging six additional 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 conditions or none at all, Oxfam said in a statement.
“Recently, IMF chief Kristalina Georgieva urged Europe not to endanger its economic recovery with the suffocating force of austerity. Yet, over the past year, the IMF has gone back to imposing austerity measures on lower-income countries,” Oxfam said.
Meanwhile, Oxfam International’s Senior Policy Advisor Nabil Abdo said; “this epitomizes the IMF’s double standard: it is warning rich countries against austerity while forcing poorer ones into it. The pandemic is not over for most of the world. Rising energy bills and food prices are hurting poor countries most. They need help boosting access to basic services and social protection, not harsh conditions that kick people when they are down.”
“The IMF must suspend austerity conditions on existing loans and increase access to emergency financing. It should encourage countries to increase taxes on the wealthiest and corporations to replenish depleted coffers and shrink widening inequality. That would actually be good advice”, said Abdo.
New analysis by Oxfam and Development Finance International (DFI) showed that 43 out of 55 African Union member states faced public expenditure cuts totalling $183 billion over the next five years. “If these cuts are implemented, their chances of achieving the UN’s Sustainable Development Goals will likely disappear,” the organisation said.
The analysis also shows that failure of governments in Africa to tackle inequality – through support for public health care and education, workers rights and a fair tax system – left them woefully ill equipped to tackle the 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 moves to undermine labour rights and protections. As a result, when COVID-19 struck, 52 percent of Africans lacked access to healthcare and 83 percent had no safety nets to fall back on if they lost their job or became sick,” Oxfam said.
They also noted that Kenya and the IMF agreed a $2.3 billion loan program in 2021, which included a three-year public sector pay freeze and increased taxes on cooking gas and food. More than 3 million Kenyans are facing acute hunger as the driest conditions in decades spread a devastating drought across the country. Nearly half of all households in Kenya have to borrow food or buy it on credit.
The Oxfam also stated that nine countries including Cameroon, Senegal and Surinam are required to introduce or increase the collection of value-added taxes (VAT), which often apply to everyday products like food and clothing, and fall disproportionately on people living in poverty.
Sudan, where nearly half of the population is living in poverty, has been required to scrap fuel subsidies, which will hit the poorest hardest. The country was already reeling from international aid cuts, economic turmoil and rising prices for everyday basics such as food and medicine before the war in Ukraine started. Over 14 million people need humanitarian assistance (almost one in every three people) and 9.8 million are food insecure in Sudan, which imports 87 percent of its wheat from Russia and Ukraine.
The analysis also said that ten countries including Kenya and Namibia are likely to freeze or cut public sector wages and jobs, which could mean lower quality of education and fewer nurses and doctors in countries already short of healthcare staff. Namibia had fewer than six doctors per 10,000 people when COVID-19 struck.
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