Global Finance: Income Inequality Increases in IMF-Supported Countries

In 64 of the 106 countries currently supported by international financial institutions (IFIs), their inequalities have increased significantly. This is according to a report published by Oxfam on Monday.

Income inequality has increased in more than 60 percent of countries currently under International Monetary Fund (IMF) and World Bank (WB) aid programs, sometimes reaching United Nations warning thresholds, according to a report by NGO Oxfam published on Monday.

According to the report, 64 of the 106 countries currently assisted by international financial institutions (IFIs) have experienced a significant increase in inequality, even particularly high in some forty countries, including Ghana, Honduras and Mozambique.

“The IMF and the World Bank present the fight against inequality as a priority, but at the same time they support policies that increase it. Ordinary people are suffering more and more due to budget cuts in health, education and transport. This high level of hypocrisy must end,” said Oxfam’s head of Washington, Kate Donald.

Moreover, the increase in public debt, especially due to rising interest rates, further reduces the capacity of these countries to properly finance the health, education or social protection necessary to reduce inequality.

However, “the agreement signed by the World Bank to reduce inequality, for the first time in 80 years, is a historic decision. But if the Bank really wants to act in this area, the first test will be to make it a priority for its loans to the poorest countries,” Donald added.

Aid to developing countries, especially those currently in or at risk of debt crisis, will be one of the main topics discussed at the annual meetings of the IMF and the World Bank, which will be held all week in Washington. Public spending necessary to support economies facing the pandemic, and then shocks caused by global inflation or even the war in Ukraine, have forced countries to borrow, at a time when interest rates have risen, encouraged by the central banks of major economies struggling with inflation. A cocktail that significantly increased debt servicing in certain countries, unable to meet their deadlines, which sometimes take more than half of their budgets.

The IMF regularly emphasizes, throughout its programs, the need for governments to protect the most vulnerable groups in their population, while the World Bank’s primary mission remains the end of world poverty.

Sami Nemli with agency / ECO inspirations