Countries locked into IMF austerity programs are also around twice as vulnerable to economic fallout from war against Iran

Countries locked into International Monetary Fund (IMF) austerity programs are also, on average, around twice as vulnerable to the economic fallout from the US and Israel’s war against Iran and the escalating climate crisis, reveals new Oxfam analysis ahead of the World Bank and IMF Annual Meetings in Bangkok, Thailand. 

Of the 28 countries with ongoing IMF loan programs, 24 are being required to implement austerity cuts. These countries were already facing acute food, fuel and economic pressures before the war began:

• 51 percent of people were food insecure, 1.8 times more than in the rest of the world.
• 57 percent of people lacked access to clean cooking fuel, around 2.4 times more than in the rest of the world.
• External debt service was around 1.5 times higher than in the rest of the world.
• Aid to these countries fell by 22 percent in real terms between 2021 and 2024.
   

IMF-imposed austerity now risks leaving these countries even less able to withstand the fallout from the war against Iran and future shocks. The Fund has acknowledged that the war’s economic fallout is highly uneven – hitting poorer countries with limited safety nets hardest – and past crises have shown that cutting public spending during economic downturns can deepen poverty and inequality and push more people into hunger.

In Ecuador and Guinea-Bissau, for example, governments are being required to implement austerity measures equivalent to more than 4 percent of GDP. Sierra Leone’s fiscal adjustment is expected to surpass 5 percent of GDP. By the end of its loan program, the country will have implemented austerity measures equivalent to more than five times its annual healthcare budget. Bolivia, whose IMF loan program was approved last week, is being required to implement austerity measures equivalent to 8.5 percent of GDP by 2029, about twice its annual healthcare budget.  

“In the past we have seen the IMF take decisive action when countries were hit by global shocks – from COVID-19 to the war in Ukraine – using tools like emergency lending and SDRs. But this time, the Fund is taking a very different path. Instead of helping countries withstand another major shock, it is doubling down on austerity – forcing them to cut back on the very spending that can help protect people and recover – and leaving them even more vulnerable to the next crisis,” said Oxfam International Executive Director Amitabh Behar.

New Oxfam analysis of 161 loans across 81 countries shows that between 2018 and 2025, the IMF required spending cuts that were five times larger than those between 2012 to 2017 (a median cut of 1.7 percent of GDP compared to 0.3 percent). Over the same periods, median social protection floors in low-income countries with IMF programs dropped from 29 percent to around 14 percent of current public spending.

The findings come shortly after IMF’s 2026 Review of Program Design and Conditionality, concluded by its Executive Board on 14 September. The review recommended "frontloaded" adjustments, which require governments to slash public spending in bulk at the start of a program rather than phasing in cuts over time.

Ahead of the World Bank and IMF Annual Meetings in Asia, where the war’s economic fallout is being felt particularly sharply, Oxfam is calling on the IMF to:
 

• Establish immediate relief mechanisms and roll out emergency lending similar to the food shock window created after Russia’s invasion of Ukraine.
• Ease loan conditions and fiscal targets for countries facing budget and balance-of-payment pressures due to the war. 
• Issue a new allocation of Special Drawing Rights to inject much-needed liquidity to help countries confront the economic fallout from the war and the looming impacts of a “super” El Niño.