IMF urged to stop promoting austerity around world

AMMAN — Over 500 human rights, women, environment and public health organisations and academicians across the world have called on the International Monetary Fund (IMF) to “immediately stop” promoting austerity around the world.

In a letter, the signatories urged the IMF to advocate policies that advance gender justice, reduce inequality, and decisively put people and planet first, according to a copy of the document made available to The Jordan Times. 

“As those who care about governments’ ability to fulfil human rights and advance progress towards the Sustainable Development Goals, we express the utmost alarm at the IMF’s advice for countries to return to austerity once the current crisis recedes. 

“This pandemic has laid bare the deadly repercussions of systematically weak investments in health, education and social protection, hardest felt by marginalised populations including women, older people, racial and ethnic minorities, informal workers and low-income families. This crisis has also shone light on the shrinking of the middle classes and worsening gap between rich and poor,” read the letter.

The IMF has spoken repeatedly of the need for a fair and green recovery. It has said that economic and gender inequality, climate change, and poor governance can weaken growth and undermine stability, the signatories said.

In recent years, it developed operational guidance for staff on embedding gender and economic inequality analysis into its work and approved a macroeconomic framework for social spending. All of this would suggest that the IMF is ready to use its influence and authority to support countries in reducing inequality, according to the letter.

“And yet, despite this rhetoric and its own warnings of deepening inequality, the IMF has already started locking countries into new long-term austerity-conditioned loan programmes in the past few months. Beyond the conditionality in these recent programme, we note that a significant number of the IMF’s COVID-19 emergency financing packages contain language promoting fiscal consolidation in the recovery phase. 

“And with governments struggling to pay increased debt servicing and expected to continue to need extraordinary levels of external financing for years to come, IMF loan programmes — and the conditions that accompany them — will play a highly influential role in shaping the economic and social landscape in the aftermath of this pandemic,” they said

Fiscal consolidation driven austerity would only worsen poverty and inequality and undermine the achievement of economic and social rights, they added.

“Time and time again, rigid and rapid fiscal consolidation conditioned in IMF programmes has meant devastating cuts in health and education investments, losses of hard-earned pensions and social protections, public wage freezes, layoffs, and exacerbated unpaid care work burdens. In all cases, it is the most vulnerable people in societies who bear the brunt of these reforms, while the elite, large corporations and creditors enjoy the benefits,” the letter said.

Instead of austerity cuts, it is critical to create fiscal space and give governments the time, flexibility and support to achieve a sustainable, inclusive and just recovery. Immediate and urgent steps are needed to support the financial health of countries through grants and other highly concessional financing, supporting debt cancellation and restructuring, and issuing a new allocation of Special Drawing Rights, they said.

Medium to longer-term recovery efforts, however, should continue promoting further fiscal and policy space that allows for an increase, rather than a decrease, in social spending, and progressive tax policies that collect sufficient revenue and redistribute wealth fairly. 

“Ahead of the 2020 IMF Annual Meetings, we call on the IMF to turn away from the mistakes of the past and finally close the dark chapter on IMF-conditioned austerity for good,” the signatories said.