IMF/World Bank: Inaction on Global Economic Crisis

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The Annual Meetings of the International Monetary Fund and the World Bank have failed to step up to the gravity of the global economic crisis, in particular for developing countries, where the economic outlook continues to worsen. No major decisions were taken to support these countries, and the initial emergency response to the COVID-19 pandemic is becoming too little as the crisis wears on.

Sharan Burrow, ITUC General Secretary, said “Multilateralism needs to be fixed so there can be a coordinated effort to end the crisis and achieve a fair and resilient recovery. The IMF and World Bank need reform, and replenishment, to meet the scale of the global emergency and contribute to decent employment and sustainable development. The international community needs to move swiftly on a global social protection fund, to avoid absolute destitution for hundreds of millions of people.”

While the IMF is warning against premature removal of crisis response measures, it continues to promote a post-crisis return to austerity for developing countries, which would have catastrophic impacts on lives and livelihoods. Countries need to be able to invest in health and education in particular, with a global deficit of tens of millions of jobs in these sectors which are vital in the face of the medical and economic consequences of the pandemic. Investment in job-rich measures to tackle climate change is also well below what is needed.

Debt relief and injections of liquidity are crucial to surmounting the crisis, yet the G20 Finance Ministers for their part have only extended debt suspension by six months and extended repayment deadlines for some countries. The much-needed issuance of IMF Special Drawing Rights has been delayed yet again. Some progress has been made on the framework around debt, and the IMF is seeking donor support to extend debt cancellation for low income countries through to April 2022. The World Bank should follow suit on this and, as a major creditor, it should itself participate in debt relief as should private lenders.

The G20 Ministers committed to reaching agreement on the OECD international tax agenda by the middle of next year, however the urgency of the fiscal issues facing governments requires rapid and thorough action on tax. This should include taxation of digital companies, many of which have made windfall profits since the start of the pandemic, and a global minimum tax rate to tackle the under-taxation of companies’ overseas entities.

A $12bn dollar vaccine commitment by the World Bank is welcome, and should contribute to access to all for eventual vaccines and for treatments.

“All across the world, people are seeing and feeling the urgency of the situation, but the International Financial Institutions and many finance ministers do not seem to feel the same urgency. We call on them to think beyond the failed recipes of austerity and timid responses to one of the greatest crises ever to confront humanity,” said Burrow.