‘Truly shocking’ increase in austerity makes ‘debt situations far worse’
Harsh austerity measures imposed by the International Monetary Fund have risen sharply over the last few years, causing mass struggle for poor countries, a report published Wednesday shows.
According to the report published by the European Network on Debt and Development (Eurodad)—a debt and poverty watchdog network of 48 European NGOs—this increase in IMF austerity is placing a heavy debt burden on poor countries with little to no payback, despite promises by the financial behemoth to curb its politically charged lending schemes.
IMF loans for cash-strapped countries always come with a catch: austerity conditions that “are often highly controversial,” Eurodad writes Wednesday. Examples given in the report, Conditionally Yours: An analysis of the policy conditions attached to IMF loans, include restructuring of tax codes, cutting spending, freezing or cutting public sector wages, shrinking public welfare programs— including pensions, reducing minimum wage levels, and privatizing public resources.
Such policies fail to stabilize damaged economies, the group warns.
Following past pressure from groups such as Eurodad, the IMF recently said it would try to “streamline” its required austerity conditions. However, just the opposite has happened.
“What we found was truly shocking,” writes Jesse Griffiths, co-author of the report and director of Eurodad. “The IMF is going backwards – increasing the number of policy conditions per loan, and remaining heavily engaged in highly sensitive and political policy areas.”
Austerity conditions and structural adjustment programs have sharply increased in recent years, Eurodad reports, with the biggest burdens placed on countries in need of the biggest loans, such as Cyprus, Greece and Jamaica.
As the group points out, crisis-ridden Ukraine is the latest country to sign the dotted line with the IMF, which in turn imposed austerity measures. In exchange for $27 billion dollars in loans, the IMF is requiring the country to “follow a more stringent fiscal policy,” Reuters reports.
“It is clear that the IMF needs a major overhaul,” writes Griffiths. “It should stop using its power to interfere in highly sensitive and controversial economic reforms, and recognize that its current model often makes debt situations far worse.”
“We recommend that the IMF focuses on its true mandate of providing emergency funding without harmful conditions, and that more permanent and just solutions are found for countries devastated by debt crises,” he adds.
This article first appeared on Common Dreams