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.