The International Monetary and Financial Committee (IMFC) gave its approval today to set up a new IMF-administered Resilience and Sustainability Trust (RST) that will allow wealthy nations to channel some of their Special Drawing Rights (SDRs) to more vulnerable countries. In response, Nadia Daar, Head of Oxfam International’s Washington DC Office, said:
“While it is positive that the RST will be accessible to a wide range of countries, including vulnerable middle-income countries hit hard by the COVID-19 pandemic, it is vital that the IMF deliver these funds on terms that are as close to grants as possible. It is unacceptable that the RST will likely hinge on countries having a separate IMF loan program in place, bound by conditions like freezing public sector wages and raising taxes on the poorest. Austerity measures like these will only worsen inequality and poverty. We want to see significant SDR channelling, but it must work for countries and communities on the receiving end.
“It is encouraging that the IMFC recognises the importance of helping countries address critical issues impacting their economies, including climate change and inequality. But if the IMF fails to assess and address the impacts of its own policies on inequality, it will hypocritically continue to lead countries down a long and painful path.”
Oxfam and Development Finance International’s Commitment to Reducing Inequality Index (CRII) shows that 14 out of 16 West African nations intend to cut their national budgets by a combined $26.8 billion over the next five years in an effort to partly plug the US$48.7 billion lost in 2020 alone across the entire region due to the pandemic. Such austerity has been encouraged by the IMF, through its COVID-19 loans.
Between March 1 2020 and March 15 2021, 85 percent of the IMF’s COVID-19 loans to 85 countries encouraged, and in some cases required, countries to pursue austerity measures in the aftermath of the crisis. Download “Adding Fuel to the Fire: How IMF Demands for Austerity will Drive Up Inequality Around the World”.
Oxfam was one of the first organisations to call for a new SDR issuance as part of a broader economic rescue plan when the crisis hit in 2020. Oxfam and 280 civil society organizations and academics called on the IMF and G20 for principles for fair channelling of SDRs.