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African countries grapple with 50 years of IMF austerity

Guest content
12 October 2023

ActionAid's latest report, 'Fifty Years of Failure: the IMF, Debt, and Austerity in Africa', sheds light on the ongoing challenges African countries face due to the International Monetary Fund's (IMF) austerity policies, writes Winston Mwale. 

The timely report coincides with the first IMF/World Bank Annual meeting held in Africa in half a century. Based on extensive research and poignant personal testimonies collected from ten African countries, including Ghana, Kenya, Malawi, Nigeria, Senegal, Sierra Leone, Tanzania, Uganda, Zambia, and Zimbabwe, the report underscores the detrimental effects of the IMF's austerity measures on health, education, and overall development across the continent.

Rather than pursuing systemic solutions to Africa's mounting debt crisis or exploring alternatives like progressive tax reforms, the IMF persists in enforcing public spending cuts that disproportionately impact women and disadvantaged groups.

The report reveals that eight out of ten countries have recently received IMF advice to cut or freeze public sector wage bills. Shockingly, all ten countries have been advised to allocate their budgets in a manner that places them below the global average for frontline workers in health, education, and other essential sectors.

This has led to recruitment freezes, salary freezes despite rising living costs, and even layoffs of frontline workers in some countries.

Women, who constitute the majority of frontline public sector workers and are often on vulnerable employment contracts, have been particularly affected.

Despite adhering to the IMF's recommendations for decades, 19 of Africa's 35 low-income countries currently find themselves in debt distress or at high risk.

Many countries face a dire cost of living crisis and escalating debts, largely due to external factors like COVID-19, the Ukraine conflict, and rising global interest rates, which are beyond their control.

Astonishingly, the amount African governments are compelled to spend on interest payments often exceeds allocations for education or health.

Unfortunately, there is little effort to find a comprehensive solution to this debt crisis.

Countries must negotiate individually, bearing the brunt of a problem they did not solely create, with the most vulnerable paying the price.

ActionAid's report presents clear alternatives for overhauling the public finances of African nations, emphasizing ambitious and progressive tax reforms that target the wealthiest individuals and corporations.

Strikingly, the IMF's own staff analysis suggests that the most effective way to finance the Sustainable Development Goals is for countries to raise their tax-to-GDP ratios by five percentage points. However, this advice rarely materializes in practice at the country level.

Instead, the IMF often recommends regressive taxes that burden those least able to pay.

Adding to these challenges is the fact that African countries continue to have limited influence in decision-making at the World Bank and the IMF, holding less than 10% of the vote share in the IMF board.

Sub-Saharan Africa's 46 countries are represented by only two executive directors, highlighting the outdated and imbalanced voting structure that predates the independence of most African nations.

This report builds on a series of previous reports, including "Who Cares for the Future" (2020), "The Pandemic and the Public Sector" (2020), "The Public Versus Austerity" (2021), and "The Care Contradiction - The IMF, Gender, and Austerity" (2022). Each report provided compelling evidence for the need to change course. As the IMF meetings take place on African soil for the first time in half a century, now is the time for action.

In light of this new evidence, the report calls for action from the IMF and African governments:

  • A Call to the IMF: The IMF should definitively move away from the failed neoliberal economic model, cease imposing austerity policies, and lift constraints on public sector wage bills. Instead, it should support debt cancellation and ambitious, progressive tax reforms at national and international levels.

  • A Call to African Governments: African governments should collectively coordinate for a resolution to debt crises, prioritizing radical renegotiation or debt cancellation. They should also advance this case in climate negotiations. The time has come for African governments to embrace alternative economic paths that prioritize quality public services, social and economic justice, and the creation of sustainable, truly sovereign states.

This report serves as a clarion call for change, emphasizing the urgency of addressing the IMF's impact on Africa and advocating for a more equitable and just economic future for the continent.

Fifty Years of Failure: The IMF, Debt and Austerity in Africa – ActionAid

Original source: The Africa Brief

Image credit: Some rights reserved by World Bank Photo Collection, flickr creative commons