The vast majority of International Monetary Fund loans extended during the Covid-19 pandemic have suggested or demanded spending cuts that would worsen poverty and inequality, charity group Oxfam says.
Seventy-six of the fund’s 91 loans since March have sought belt tightening, according to Oxfam. The result could be deep cuts to public healthcare and pensions; wage freezes and cuts for workers such as doctors and teachers; and reduced unemployment benefits like sick pay, the group said Monday.
“The IMF has sounded the alarm about a massive spike in inequality in the wake of the pandemic,” said Chema Vera, Oxfam International’s interim executive director. But the measures it is advocating “could leave millions of people without access to healthcare or income support while they search for work, and could thwart any hope of sustainable recovery.”
With the world’s debt set to approach record levels this year and about half of all low-income countries either in or at risk of debt distress before the health crisis, central banks have cut rates to supply liquidity. The IMF has expressed concern about rising inequality, telling its 189 member nations to spend what they need to save lives and support their populations.
The fund, responding to Oxfam’s analysis, maintains the emergency financing it has delivered has focused on immediate fiscal support with no conditionality. It says that once the pandemic is over, many countries will face higher debts and lower revenue and will need to put their finances back on track.
The IMF has three priorities for countries to get their finances back on track, according to spokesman Gerry Rice.
- Boost revenues through progressive tax measures while cracking down on loopholes and evasion;
- re-prioritize spending and enhance efficiency; and
- for the international community to “step up” and provide grants and concessional financing, additional debt relief, and in some cases re-profiling or restructuring debt
Still, Oxfam says it’s worried that the IMF risks repeating the mistakes of a decade ago, when working people paid the price for austerity after the 2008-2009 financial crisis. The IMF should press countries to boost investment in universal health and education, and ensure that rich people and big companies pay their fair share of taxes, the charity group said.
The assessment comes as the IMF and World Bank hold their annual meetings this week, moving to a virtual format due to the outbreak that has cost more than 1 million lives and resulted in a global recession. Growing debt vulnerabilities are expected to be a key theme at the gathering.
The Group of 20 nations and Paris Club agreed in April to waive billions of dollars in repayments until the end of the year from poorer nations. The World Bank says this isn’t enough and wants debt stocks reduced to prevent a bigger fallout. Angola, Argentina, Chad, Ecuador, Lebanon and now Zambia have all either already renegotiated some private-creditor debt or are doing so.- Bloomberg