The vast majority of IMF loans extended during the COVID-19 pandemic have suggested or demanded spending cuts that would worsen poverty and inequality, charity group Oxfam said yesterday.
Seventy-six of the fund’s 91 loans since March have sought belt tightening, Oxfam said.
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 such as sick pay, the group said.
“The IMF has sounded the alarm about a massive spike in inequality in the wake of the pandemic,” Oxfam International interim executive director Chema Vera said.
However, 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, said the emergency financing it has delivered has focused on immediate fiscal support with no conditionality.
It said 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: Boost revenues through progressive tax measures while cracking down on loopholes and evasion; reprioritize 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, fund spokesman Gerry Rice said.
Oxfam said that it is worried that the IMF risks repeating the mistakes of a decade ago, when working people paid the price for austerity after the 2008 to 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 group said.
The assessment came ahead of yesterday’s opening of the IMF’s and World Bank’s annual meetings, which have been moved to a virtual format.
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