$101 billion to 81 countries. That's how much COVID-19 financing the International Monetary Fund (IMF) has lent to countries so far. And it has committed to deploy an overall $1 trillion in lending to countries in need.
But what’s behind those numbers? Until now, it hasn’t been easy to know how governments have promised to spend that money, and what economic measures the IMF is advising each of them to take, during the heat of this crisis, but also as the pandemic eases. What taxes is the IMF encouraging our governments to levy on us for example, and what can we expect to happen to the social protection so many have desparately needed as one by one, millions have lost their jobs around the world?
Over the past few months, we’ve been combing through thousands of pages, extracting and collating data from 91 IMF COVID-19 loans approved to 81 countries by September 20, 2020, to help us get answers to these questions. We’re now able to share them with you, in Oxfam’s new open-access dataset looking at the spending, accountability, and recovery measures included in IMF COVID-19 loans. With it, you can get a snapshot view of any IMF loan approved so far - with quotes pulled from official IMF documents - and get an idea of what any government has agreed with the IMF as it took on these vast sums of money. Below are just some of the trends we found using the dataset, most worrying of which, was the widespread encouragement of austerity measures in the aftermath of the pandemic. More on that later.
Firstly, who got the big bucks?
While Sub-Saharan Africa has received the highest number of loans worth a total of $15.8 billion, the lion’s share of the committed funds has actually gone to Latin America and the Caribbean ($50.9 billion to 20 countries). In fact, over 50% of the IMF’s total COVID-19 financing has been committed to just three countries: Peru, Chile, and Colombia.
The Fund’s emergency financing instruments (Rapid Financing instrument (RFI) and Rapid Credit Facility, for low income countries) have been quite popular as they’re quick, relatively cheap, and disburse easily, free of formal policy reform requirements or so-called “conditionality”. So far 69 countries have borrowed $29.1 billion of this type of financing. However 42 of those 69 have now maxed out their annual access limits for emergency loans, so if they want additional funds from the IMF - which many say they do - they will have to wait, or enter much tougher conditionality-bound loan programs.
Follow the money
Encouragingly, a thread running through the loan packages is the IMF’s encouragement, and borrowing countries’ stated intent, for funds to be used to meet urgent health and social protection needs, including relief for vulnerable households. But these are simply stated plans rather than firm and binding commitments. And as such, the transparency and anti-corruption measures that accompany these loans are crucial.
Despite its advice to countries to “keep the receipts”, the data shows that 32% of countries which received IMF loans failed to commit to undertake audits for their COVID-19 expenditures. This lack of accountability is highly concerning, and it will be critical for the IMF to ask some hard questions if, and when, those countries come back for more funds.
Paving the path to austerity
By far, the most shocking trend we found, was the IMF’s emphatic call for austerity once the COVID-19 crisis abates. We found fiscal consolidation measures promoted in a whopping 84% of the loans, across 67 countries. This pervasive trend was found in 76 of the 91 loans we reviewed and was not confined to one type of loan instrument.
For example, we noted this explicit advice for countries that took on emergency loans (RFIs and RCFs) such as Gabon, Mozambique, South Africa, El Salvador, and Tunisia.
In cases like Egypt and Ukraine which entered more traditional IMF programs, these measures actually came in the form of loan conditions. The Gambia and Jordan also took on traditional loans early in the crisis (presumably negotiated pre-pandemic) and though Jordan was allowed temporary flexibility for emergency spending, the country is expected to get back on track with fiscal consolidation after the pandemic.
In some instances, like Cameroon and Ethiopia, which had existing IMF programs binding them to fiscal consolidation pre-pandemic, with their new COVID-19 financing, they agreed to resume such measures once the crisis recedes.
To illustrate what the future could hold for some countries in the COVID-19 recovery period, at least 9 countries, including Afghanistan, Nigeria, and São Tomé and Príncipe intend to introduce/increase Value Added Tax (VAT) collection, while 14 countries plan to cut their wage bills including Tunisia, Barbados and Lesotho. Worryingly, some have committed to undertake both these measures.
The Fund’s recurring policy recommendation it appears, is for pandemic related fiscal measures to be targeted, temporary and reversed upon cessation of the pandemic. The Fund advised Ecuador, for example, to reverse its increased health spending and cash transfers once the pandemic wanes.
Some loan agreements such as those of Mozambique and Kenya say that health spending and social protection will be protected while pursuing fiscal adjustment during recovery. However, history has shown us that IMF-imposed rigid and rapid fiscal consolidation in response to previous crises around the world, has meant cuts to schools and hospitals, loss of benefits for workers and the elderly, increases in regressive forms of taxation that impact low income households and women disproportionately, and exacerbate economic and gender inequality. It is no wonder such austerity has been met with so much anger. From protests across the world, to people’s assemblies to fight inequality, to a public call against IMF-imposed austerity signed by over 500 organizations and academics from 87 countries last week, the world is saying no more.
The alternative path
We know that low spending on public healthcare, weak social safety nets, and poor labor rights meant most of the world’s countries were woefully ill-equipped to deal with COVID-19. Oxfam and Development Finance International’s newly released Commitment to Reducing Inequality Index shows the data on this for 158 countries and demonstrates clearly what each country needs to be doing in order to tackle inequality. The solutions are there. The IMF should immediately reverse course, pursuing instead a policy framework that supports countries to tackle gender and economic inequality, and to achieve the Sustainable Development Goals. Not just in words, but in action.