New Telegraph

Oxfam: IMF loans force spending cuts, worsen poverty

Most of the loans that the International M o n e t a r y Fund (IMF) has extended during the COVID-19 pandemic have suggested or demanded spending cuts that would worsen poverty and inequality, charity group, Oxfam, has said.

 

According to Bloomberg, the group said yesterday that 76 of the IMF’s 91 loans since March have required belt tightening, adding that 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 news agency quoted Oxfam International’s interim executive director, Chema Vera, as saying that: “The IMF has sounded the alarm about a massive spike in inequality in the wake of the pandemic.

 

The measures the Fund 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. Bloomberg reports that in its response to Oxfam’s analysis, the IMF maintained that the emergency financing it has delivered has focused on immediate fiscal support with no conditionality. It noted 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.

 

According to IMF spokesman, Gerry Rice, the Fund has three priorities for countries to get their finances back on track. These include: Boosting revenues through progressive tax measures while cracking down on loopholes and evasion; re-prioritizing spending and enhancing 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.

 

Indeed, in the wake of the devastating impact of the pandemic on their economies, many African countries have already been granted loans by the IMF. Nigeria obtained a $3.4 billion loan from the Fund in late April, a facility that the Federal Government said came with no conditionality. But Oxfam said it is worried that the IMF risks repeating the mistakes of a decade ago, when working people paid the price for austerity after the 2008-2009 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 one 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 has said that 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.

 

Meanwhile, the IMF disclosed yesterday that the total external debt for countries that have applied for G20’ s Debt Service Suspension Initiative (DSSI) climbed 9.5% to a record $744 billion in 2019 from the previous year’s.

 

The Fund said this highlights the urgent need for creditors and borrowers alike to collaborate to stave off the growing risk of sovereigndebt crises triggered by the COVID-19 pandemic.

 

The IMF, which stated this in its, “International Debt Statistics (IDS): report released yesterday, said the pace of debt accumulation for these countries was nearly twice the rate of other low and middle-income countries in 2019. The Fund said that prior to the onset of the COVID- 19 pandemic, rising public debt levels were already a cause for concern, particularly in many of the world’s poorest countries as discussed in its “Four Waves of Debt,” report published in December 2019.

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