The International Monetary Fund (IMF) has encouraged social spending of 1 billion dollars in 13 poor countries while requiring them to cut public spending by 5 billion dollars, a contrast highlighted by a report from the international anti-poverty coalition Oxfam.
"This suggests that the IMF was four times more effective in getting governments to cut their budgets than in ensuring minimal social investments," said Oxfam Internacional's interim executive director, Amitabh Behar.
Oxfam argues that the role of multilateral lenders in helping to protect people in low- and middle-income countries from the economic crisis "is incoherent and inadequate". That initiative "is in tatters," says the coalition of 19 non-governmental organisations in its report El piso de gasto social del FMI ¿Una hoja de parra para la austeridad? (The IMF Social Spending Floor: A fig leaf for austerity?) and would instead pay for a new "lost decade" for development.
Behar said, "This is deeply worrying and disappointing, given that the IMF itself urged countries to build back better after the pandemic by investing in social protection, health and education". "Among the two billion people suffering most from the effects of austerity cuts and reduced social spending, we know that it is women who always bear the brunt," added the Oxfam official.
Oxfam analysed the social protection, health and education components in all IMF loan programmes agreed with 17 low- and middle-income countries in 2020 and 2021. It found inconsistencies and that "there is no standard or transparent way to track progress, and many of the minimum targets were inadequate".
According to its data, none of the 17 countries currently has a social spending floor sufficient to cover the cost of meeting the World Health Organisation's (WHO) Sustainable Development Goal target for health, "much less goals in other areas such as education ".
The floors agreed by the IMF with Cameroon, Chad, Jordan and Madagascar meant that their social spending targets set in the programme actually fell by between three and five per cent over the course of their loans, "suggesting that austerity is eating away at social spending".
In 11 cases where countries showed a nominal increase in their minimum social spending, it appeared that inflation was not taken into account. Where Oxfam did, their rates of increase were noticeably slower and, in three cases, showed a real decrease.
Lending programmes are also largely gender blind.
Only four borrowing countries - Costa Rica, Gambia, Jordan and Moldova - had made substantive gender considerations in their IMF lending. In 13 other cases such information was "very limited" and, in Suriname, completely absent.
Oxfam analysed 63 of the 124 conditions related to social floors that had implementation data available, and found that only 65% (41 out of 63) had actually been implemented.
The Democratic Republic of Congo and Madagascar have met none. Only Jordan had met all of its social spending floors.
In contrast, these countries implemented 85% of their austerity targets. Countries are struggling to meet their social spending floors and Oxfam believes this is partly because they are having to make budget cuts for fear that their loan tranches will be delayed. "To make matters worse, these social floors have become more like ceilings," Behar said. "While only half of the 17 countries we looked at had reached their social spending floors - which is quite disappointing - only two had spent 10 per cent more than they agreed with the IMF.
Oxfam acknowledges that "the IMF has made some encouraging improvements in its attention to social protection, health and education", but "it must do much more to avoid, in its own words, repeating the mistakes of the past".
The coalition believes the Fund should allow countries more flexibility on inflation and deficit targets, move negotiations into the public discourse, and back it all up with open data.
"It should set social spending targets, rather than floors, that can be rapidly increased through different forms of wealth taxes and other progressive measures, rather than simply creating space for more privatisation and cuts elsewhere," the report concluded.
Photo. Many low-income countries cut public spending by far more than the International Monetary Fund's spending on social protection, education and health, taking resources away from the fight against poverty. © Fox/Unicef