Day: 19 April 2022

43 African governments are facing expenditure cuts totalling $183 billion (equivalent to 5.4 percent of GDP) over the next five years, reveals new analysis from Oxfam and Development Finance International (DFI) today. If these cuts are implemented, their chances of achieving the UN’s Sustainable Development Goals will likely disappear.

The Commitment to Reducing Inequality Index: Africa Briefing Paper shows that Africa’s debt burden is stifling post-COVID economic recovery and stagnating the public services necessary to reduce poverty and inequality. Africa’s debt burden has been climbing steadily, averaging 67 percent of GDP in 2021. Debt repayments are equivalent to 51 percent of African countries’ budget revenue and 22 times more than their spending on social protection. Debt servicing exceeds spending on healthcare in all but six African countries, rising to 77 times more in South Sudan. The G20 countries have so far offered little relief: debt cancellation or suspension amounts to just $9.3 billion.

‘‘Majority of African governments know and want to lift their citizens from poverty but their coffers are empty, so they need support instead of more pressure,’’ said Peter Kamalingin, Oxfam’s Pan Africa Program director. ‘‘At a time when poor countries are faced with increasing costs of living and with poor people unable to afford food, it cannot be the time to suffocate them with more austerity. That is the surest way to undermine recovery, widen inequality and destroy livelihoods.’’

The index ranks 47 African countries on their policies on public services, tax and workers’ rights. South Africa ranks first, followed by Seychelles, Tunisia, Namibia and Lesotho. At the bottom are South Sudan, Nigeria, Chad, Liberia and the Central African Republic. North Africa outperforms Africa’s other subregions, with Central Africa ranking last.

The analysis shows that African governments’ failure to tackle inequality ― through support for public healthcare and education, workers’ rights and a fair tax system ― left them woefully ill-equipped to tackle the COVID-19 pandemic. The IMF has contributed to these failures by consistently pushing a policy agenda that seeks to balance national budgets through cuts to public services, increases in taxes paid by the poorest, and moves to undermine labour rights and protections. As a result, when COVID-19 struck, 52 percent of Africans lacked access to healthcare and 83 percent had no safety nets to fall back on if they lost their job or became sick.

Quality public services are proven to reduce inequality. For example, they have reduced inequality by 34 percent in Namibia, 22 percent in South Africa and 19 percent in Benin. However, Africa’s unfair tax system is increasing inequality by 1 percent. In Tanzania and Tunisia, fair tax policies have slashed inequality by 10 percent.

Oxfam and DFI are urging the G20 to reallocate and waive off unnecessary conditionalities so that lower-income countries can access most of the $100 billion worth of IMF Special Drawing Rights (SDRs) with ease. They are calling for increased aid flows to Africa to increase access to inequality-busting public services and COVID-19 vaccines. The vaccination rate in Africa needs to increase significantly if the continent is to meet the 70 percent vaccine coverage target set for June 2022.

‘‘That some governments have fared better than others at tackling inequality confirms we can end inequality if we make the right policy decisions. This must include taxing the wealthiest, curbing illicit financial flows, restructuring debt held by poor countries and ending the pandemic through equitable access to COVID-19 Vaccines and therapeutics.’’ ― Peter Kamalingin.

Notes to editors

Download Oxfam’s Commitment to Reducing Inequality Index: Africa.

Our analysis of the IMF’s COVID-19 loans during the first year of the pandemic is also available for download.

87 percent of the International Monetary Fund’s (IMF) COVID-19 loans are requiring developing countries that have been denied equal access to vaccines and are facing some of the world’s worst humanitarian crises to adopt tough, new austerity measures that will further exacerbate poverty and inequality.

New analysis by Oxfam finds that 13 out of the 15 IMF loan programs negotiated during the second year of the pandemic require new austerity measures such as taxes on food and fuel or spending cuts that could put vital public services at risk. The IMF is also encouraging six additional countries to adopt similar measures.

In 2020, the IMF deployed billions in emergency loans to help developing countries cope with COVID-19, often with few conditions or none at all. Recently, IMF chief Kristalina Georgieva urged Europe not to endanger its economic recovery with “the suffocating force of austerity”. Yet, over the past year, the IMF has gone back to imposing austerity measures on lower-income countries.

“This epitomizes the IMF’s double standard: it is warning rich countries against austerity while forcing poorer ones into it. The pandemic is not over for most of the world. Rising energy bills and food prices are hurting poor countries most. They need help boosting access to basic services and social protection, not harsh conditions that kick people when they are down”, said Nabil Abdo, Oxfam International’s Senior Policy Advisor.

Kenya and the IMF agreed a US$2.3 billion loan program in 2021, which includes a three-year public sector pay freeze and increased taxes on cooking gas and food. More than 3 million Kenyans are facing acute hunger as the driest conditions in decades spread a devastating drought across the country. Nearly half of all households in Kenya are having to borrow food or buy it on credit.
9 countries including Cameroon, Senegal and Surinam are being required to introduce or increase the collection of value-added taxes (VAT), which often apply to everyday products like food and clothing, and fall disproportionately on people living in poverty.
Sudan, where nearly half of the population is living in poverty, has been required to scrap fuel subsidies which will hit the poorest hardest. The country was already reeling from international aid cuts, economic turmoil and rising prices for everyday basics such as food and medicine before the war in Ukraine started. Over 14 million people need humanitarian assistance (almost one in every three people) and 9.8 million are food insecure in Sudan, which imports 87 percent of its wheat from Russia and Ukraine.
10 countries including Kenya and Namibia are likely to freeze or cut public sector wages and jobs, which could mean lower quality of education and fewer nurses and doctors in countries already short of healthcare staff. Namibia had fewer than six doctors per 10,000 people when COVID-19 struck.

New analysis by Oxfam and Development Finance International (DFI) also published today reveals that 43 out of 55 African Union member states face public expenditure cuts totaling US$183 billion over the next five years. If these cuts are implemented, their chances of achieving the UN’s Sustainable Development Goals will likely disappear. In 2021, an Oxfam review of IMF COVID-19 loans showed that the Fund encouraged 33 African countries to pursue austerity policies in the aftermath of the health crisis. The pandemic has not ended but these policies are already taking shape across Africa.

The analysis also shows that African governments’ failure to tackle inequality ― through support for public healthcare and education, workers’ rights and a fair tax system ― left them woefully ill-equipped to tackle the COVID-19 pandemic. The IMF has contributed to these failures by consistently pushing a policy agenda that seeks to balance national budgets through cuts to public services, increases in taxes paid by the poorest, and moves to undermine labor rights and protections. As a result, when COVID-19 struck, 52 percent of Africans lacked access to healthcare and 83 percent had no safety nets to fall back on if they lost their job or became sick.

“The IMF must suspend austerity conditions on existing loans and increase access to emergency financing. It should encourage countries to increase taxes on the wealthiest and corporations to replenish depleted coffers and shrink widening inequality. That would actually be good advice”, said Abdo.

Notes to editors

Download Oxfam and DFI’s “Commitment to Reducing Inequality Index: Africa”. Our analysis of the IMF’s COVID-19 loans during the first year of the pandemic is also available for download.

Oxfam estimates that over a quarter of a billion more people could crash into extreme levels of poverty in 2022 because of COVID-19, rising global inequality and the shock of food price rises supercharged by the war in Ukraine. For more information, download Oxfam’s brief “First Crisis, Then Catastrophe”.

The IMF negotiated 22 COVID-19 loans with 23 countries between 15 March 2021 and 15 March 2022. 15 are loan programs that came with a full suite of conditionality or policy requirements, six are conditionality-free emergency financing and one is a Flexible Credit Line that does not usually include conditionalities. The IMF’s USUS$1.4 billion (SDR 1,005.9 million) disbursement to Ukraine was not included in Oxfam’s analysis, as it intended to help meet urgent financing needs and mitigate the economic impact of the war.

In December 2021, IMF managing director Kristalina Georgieva told Euronews that the European Union should not put economic recovery in danger with “the suffocating force of austerity”. The IMF’s own research shows austerity worsens poverty and inequality.

Photographs and video from East Africa are available. As many as 28 million people across East Africa at risk of extreme hunger. West Africa is facing its worst food crisis in ten years, with over 27 million people suffering from hunger.

According to Sudan’s latest household survey (2014), 44 percent of the population lives in poverty. However, this data does not reflect the impacts of the recent economic decline, high inflation and recent flooding. The IMF estimates that the ongoing economic crisis, exacerbated by COVID-19, will likely have significantly negative effects on living conditions and poverty.

According to the World Food Program, 9.8 million people in Sudan are food insecure. 14.3 million are estimated to need humanitarian assistance in 2022 — the highest in the past decade.

According to the World Bank, Namibia had 0.59 doctors per 1,000 people before the pandemic began.

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