Minister Donohoe Must Prioritise Poorest and Most Vulnerable at IMF and World Bank Meetings This Week

87 per cent of International Monetary Fund’s (IMF) Covid-19 loans require developing countries to adopt tough austerity measures. This is despite the fact that a deadly combination of Covid-19, conflict and climate, further exacerbated by the war in Ukraine, is pushing millions more people into poverty, hunger and destitution.

Ahead of his attendance at the Annual Meetings of the IMF and World Bank Group this week, Oxfam Ireland is urging Minister for Finance Paschal Donohoe to prioritise protecting the world’s poorest and vulnerable.

Michael McCarthy Flynn, Head of Policy and Advocacy at Oxfam Ireland, said: “This will be one of Minister Donohoe’s last meetings as Finance Minister on the global stage and it’s crucial that he does not miss this opportunity to champion the needs of those most impacted by the economic fallout of Covid-19 and the global cost of living crisis, fuelled by the war in Ukraine.

“In the toughest of times, austerity measures are the worst possible solution. Instead of supporting recovery, they actually see a scaling down of essential social protection services for women, children, the elderly and those most vulnerable. For the world’s poorest, they’re not just disastrous – they’re deadly.

“Ireland and the EU have recognised that austerity policies are counterproductive, but yet they support their imposition on poorer countries. This undermines our support to poorer countries, including through our overseas development assistance programme.”

According to research from civil society organisations working to #EndAusterity, 85% of the world’s population will live in the grip of austerity measures by 2023. This trend is likely to continue until at least 2025, when 75 per cent of the global population (129 countries) could still be living under these conditions. 

Austerity doesn’t just dismantle social protection programmes - common measures include public spending cuts, the introduction of or increase in regressive consumption taxes such as VAT; cutting or capping the wages and number of teachers, health and local civil servants and eliminating subsidies; privatising or commercialising public services such as energy, water and public transport; and reducing pensions and workers’ rights.

Ultimately, austerity measures are implemented to reduce fiscal deficits in order for the country to keep paying back and servicing debt. In January this year, the World Bank estimated that 33 countries were already “in” or at “high” risk of debt distress.

McCarthy Flynn continued: “Poorer countries will not be able to recover from the economic fallout of the pandemic and the current global cost of living and food crisis if they are crippled by debt. At the Annual Meetings, Ireland must call for initiatives to cancel all debt payments in 2022 and 2023, including to multilateral institutions such as the IMF and the World Bank for all low and lower-middle-income countries that require it.

“Cancelling debt payments is the fastest and most effective way to keep money in countries that desperately need it and free up resources to tackle poverty, hunger, inequality and the devastating impact of the climate crisis.

“Ireland could also set an example on the world stage and show leadership by reallocating 100% of its $4.69 billion allocation of IMF Special Drawing Rights (SDRs) to countries most in need.”

Oxfam research shows that G20 countries’ commitment to reallocate $100 billion of their SDRs issued to help countries deal with the Covid-19 pandemic has only resulted in pledges of $36 billion to poorer countries to date.  

At the Annual Meetings of the IMF and World Bank Group, Oxfam Ireland is urging Ireland to call for the IMF to:

• Help countries restructure their debts and support the cancellation of all low- and middle-income countries’ debt payments owed during the pandemic, and, where necessary, after the pandemic as well.
• Work with donors to maximise aid flows and ensure budget commitments on overseas development aid and humanitarian appeals are upheld.
• Encourage and support countries to make increases in social spending a permanent measure and establish the basis for securing quality, universal free public services and universal social protection.
• Do all it can to maximize re-allocation of the IMF Special Drawing Rights (SDRs) issued in 2021 from high- to lower-income countries, in ways which minimise debt and conditionality. The IMF should issue a further $650bn SDRs, reallocated to target low- and middle-income countries to enhance their ability to spend progressively.
• Ireland should re-allocate 100% of its $4.69 billion allocation of IMF SDRs to countries most in need. It has yet to re-allocate any.

ENDS

CONTACT:

Alice Dawson Lyons | alice.dawsonlyons@oxfam.org | +353 (0) 83 198 1869

Clare Cronin | clare.cronin@oxfam.org | +353 (0) 87 195 2551

NOTES TO THE EDITOR

• Oxfam spokespeople are available for comment and interview
• Oxfam is part of the #EndAusterity coalition. To read their report, End Austerity: A global report on budget cuts and harmful social reforms, click here.
• On Special Drawing Rights (SDRs):
  • SDRs are an easily accessible form of finance or cash for countries struggling to respond to multiple global shocks.
  • $650 billion-worth of Special Drawing Rights (SDR) were issued by the IMF in August 2021, as an easily accessible form of finance or cash for countries struggling with the global crisis. However, these were distributed according to quotas rather than needs, in line with IMF rules. This means that $400 billion went to high-income countries, $230 billion to middle-income countries, and just $21 billion to low-income countries, despite the tremendous needs of low-income countries.
  • Ireland has received $4.69 billion in Special Drawing Rights (SDRs) and Oxfam is calling on the Government to set an example by reallocating 100% of its allocation of IMF Special Drawing Rights (SDRs) to countries most in need. This could be done bilaterally, through conversion into hard currency, to low and middle-income countries in Africa and Asia which are most food insecure, or else multilaterally through a vehicle which strictly avoids conditionality and is concessional. Although barriers have been advanced to the reallocation of SDRs, such as to the ‘lending’ of them by the European Central Bank, we believe that what is most absent is the political will to effectively reallocate these much-needed emergency funds. This is where Ireland can provide global leadership.
  • Data on countries at risk of debt distress and can be found here- https://www.worldbank.org/en/news/press-release/2022/02/15/greater-transparency-on-hidden-and-distressed-debt-can-reduce-global-financial-risks-and-support-recovery