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 agreed to a $2.3 billion loan program in 2021, which includes a three-year public sector wage freeze and a tax hike on cooking gas and food. 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 which disproportionately affect people living in poverty.
  • Sudan, where nearly half the population lives in poverty, has been forced to scrap fuel subsidies that will hit the poorest 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 that are already short of health workers. 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 cuts are implemented, their chances of achieving the UN’s Sustainable Development Goals will likely vanish. 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.

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