Five hundred of the world’s leading charities and social groups have sent a letter to the International Monetary Fund warning that its support programmes, which have had to be ramped up to cope with COVID-19, were condemning many countries to years of austerity.
The concern raised before the IMF and World Bank annual meetings next week said current programmes would see 80 countries required to implement austerity worth on average 3.8% of their annual economic output between 2021 and 2023.
An analysis by one of the 500 signatories of the letter, the European Network on Debt and Development, estimated that future fiscal consolidation would represent almost five times the resources allocated to this year’s COVID-19 packages.
More than half the projected consolidation measures — equivalent to 2% of gross domestic product — will take place next year, they added. Some 56 countries would be left with higher public debts by 2023; 30 would end up paying an additional amount equivalent to their 2020 COVID-19 packages to creditors as debt service costs rose every year.
“For 46 countries for which data is available, a decade of austerity measures will reduce public expenditures from 25.7% to 23% of GDP between 2020 and 2030,” the analysis said. The letter here called on the IMF to “immediately stop promoting austerity around the world”.
The IMF has responded to an unprecedented number of calls for emergency financing as a result of this year’s pandemic and lockdown measures driving the global economy into a severe recession.
More than 100 countries have requested their help so far. The IMF has doubled the access to its emergency facilities – the Rapid Credit Facility and Rapid Financing Instrument – expecting demand for support to reach about $100 billion.
On Monday, the Fund’s board also approved a second six-month tranche of debt-service relief for 28 member countries under the Catastrophe Containment and Relief Trust. The trust has already provided over $30 billion and is backing an extension of the G20-led Debt Service Suspension Initiative for over 70 of the world’s poorest countries.
“Where debt is unsustainable, it should be restructured, the sooner the better,” IMF chief Kristalina Georgieva said as part of a blog post here last week.