Session abstract: IMF and World Bank loans, policy advice and research profoundly affect the fiscal space available for investment in public services and the direction of public service reforms. What needs to change in the light of COVID-19 and the climate crisis? This session will share the latest research and explore alternatives.

• Moderator: Jean Saldanha (Eurodad)
• Nyaradzayi Gumbonzvanda, Executive Director / former board chair / AU Goodwill Ambassador.
• Rozaria Memorial Trust / ActionAid
• Federico Davila, Vice-President, Public Services International (PSI)
• Mauricio Soto, Deputy Division Chief, Fiscal Affairs, IMF
• Alberto Rodriguez, Director for Strategy and Operations in Human Development, World Bank

Jean Saldanha

• The state of public and education public are underfunded and understaffed as a result of decades of austerity, due to neoliberal policies, which have been exacerbated by Covid19.
• The pandemic has highlighted how market-based systems are not reliable.
• New transformative policies are needed to address inequality and create resilient societies able to respond to challenges, particularly in the context of climate change.
• It is crucial that BWIs reflect how their policies affect people and take measure to address these issues.

Nyaradzayi Gumbonzvanda

• IMF policy advice can create an environment where public services are funded.
• More rhetoric from Washington DC is needed. Investment for the fulfilment of HR obligations is necessary.
• Austerity is likely to affect 8 per cent of the world this year.
• Austerity is encouraged by the IMF in country programmes, profoundly affecting funding of public services, which was already low pre pandemic.
• Lessons are not being learned. The return to austerity will hit women the hardest. ILO supports these findings
• IMF is supporting fiscal consolidation and reduction of debt. This have been seen in the Oxfam report from last year, which found that IMF policies get to inequality.
• Action Aid report from October 2021, titled The public versus austerity, shows these constraints and how austerity remains in IMF fiscal advice.
• Pre-covid only 1 in 8 countries were expending enough on social protection. The uneven distribution by the burden of austerity is carried by women and vulnerable people.
• IMF should focus its energy on people centered just ecological recovery and fight inequality, not support it. It should support governments to take alternative policies, such as progressive taxations.
• Austerity will not help Building Back Better. We need to build for the future.
• Inequalities arise from the inequality of access to vaccines and the lack of resources for public health services.
• The latest issue of IMF SDRs is welcomed, but a strong case remains for the allocation of a bigger SDR (3 billion as proposed by civil society organisations)
• We need to take advantage of the knowledge by organisations such as ActionAid and learn from the local networks routed in the ground.

Federico Davila

• PSI’s main slogan is, “los pueblos por encima del lucro” (people above profit)
• There have been 2 more pandemics: poverty and war – both are impacting the climate crisis and populations.
• International organisations are taking part as the main actors in these 2 crises.
• New agreement between the IMF and Argentina and the World Bank human capital reform show some things are being addressed:
  • IMF Argentina has lowered some of the traditional conditionalities (labour reforms, for example). There’s been renegotiation for the country to reorganise itself in the next 4 years
  • Funds from 2018 credit, have not been controlled. These have been used to fix the balance of payment without affecting the more vulnerable sectors. The country needs to pay back money it is not sure is in the country, it has been flee of capital.
• The IMF should tackle country issues, not only from the side of expenses but also payment – tax evasion, fiscal paradise, etc. IMF (and other IFIs) should have better control on countries to avoid this
• Market liberalisation – not working any more. Privatisation of state services is not the right way.
• PSI against privatisation of services, basically bc free market has not been able to solve any of the problems brought by the pandemic. Additionally to the regulation of patents re vaccines – private companies look for profit

Jean Saldanha

• I would like to raise attention towards The future is public global manifesto from last year. It has brought support from more than 190 organisations internationally, reflecting how the issue is extended and filtering NGOs but also society.
• 10 Basic principles (from the manifesto):

1. 1. Universal and accessible to all. This includes both economic and physical accessibility. Everyone can access services to live in dignity and realise their rights, irrespective of social or economic status and geographic location. All services are accessible to all irrespective of their income and are located as close as possible to users. Some services, including for example education and essential healthcare, should be provided for free to all users at the point of use.
   2. Participatory, transparent, trusted and democratically accountable. All members of the community or society can participate in the design, organisation, governance, financing, delivery and monitoring of public services. They are transparent and comprehensive information about them is publicly available.  They are accountable to the public, and, as a result, they are built on and encourage trust and respect in society.
   3. Improving and adaptable, responsive and transformative to those they serve. They are evolutionary, adjusting to technical changes and peoples’ unfolding needs, and they may expand into new areas. They adapt to different needs and are non-discriminatory. They improve in quality over time, and never lower their standards, in accordance with the obligation of non-retrogression, meaning that there should never be any reduction in the reach or quality of services.
   4. Built on a solid foundation of long-term public financing. This is reflective of their nature as the fulfilment of the State’s redistributive function, and ensures continuity of provision in the long-term, primarily based on progressive taxation.
   5. Founded on solidarity. They feature or embed solidarity-based redistributive mechanisms between those who can contribute to the system proportionally to their means and those who cannot.
   6. Committed to equality, including gender equality, and social justice. This applies at all levels of organisation, management and operations. Universal quality public services recognise and actively challenge power imbalances, structural and systemic discrimination, and systems of oppression. This includes a commitment to promoting equality in their organisation, including gender equality in their leadership, management and delivery.
   7. Environmentally and ecologically conscious. They work to care for both people and the planet, and contribute to building a more sustainable future. All aspects of their management, including governance mechanisms, their cost structure, and the organisation of their operations, decisively contribute to addressing the ecological crisis. They have a long-term vision, placing present and future generations’ best interests at the core of decision-making and integrating wider social, cultural and ecological concerns.
   8. In proximity. Universal quality public services are accessible locally and are managed, delivered, and monitored at the closest point of use to those they serve, backed by funds provided by all relevant levels of government, at the local, regional, national or international level as appropriate, based on a fair and effective distribution of resources. They are available when and where needed, in order to truly realise universal access in practice.
   9. Just, secure and safe, both for those who use the services and those who provide them. Workers feel physically safe and mentally safe while at work or on their way to and from work. Universal quality public services value the people who work for them as well as the people who use them, including by providing decent employment, pay and working conditions. They are staffed and funded at an appropriate level to ensure quality service can be delivered to all.
   10. Protected from the market economy, commercialisation and financialisation. Universal quality public services are accessible to everyone as a right, to fulfil life’s needs, and not as commercial, commodified products or services to consume. Decisions about public services are not made on the basis of profit making, but are entirely guided by the realisation of human dignity and the fulfilment of collective needs.

• Mechanisms increasingly promoted as solution (such as PPP) are not a silver bullet, may be treated with care (pose liability on the public, are not transparent)
• Public sector should have a stronger role.
• The investments on privatisation of public services have deepen inequality
• The manifesto proposes a break from past, learn from mistakes and end to austerity and privatisation

Mauricio Soto

• It is outdated to think about the IMF as an institution that support cuts in detriment of poor.
• The IMF has called for more spending – it did not recommend cuts to poor countries during the covid crisis. The IMF tries to have a country specific approach to protect expenditure.
• Fiscal support strengthening gov. March 2020-22 support to over 90 countries – unprecedented support buy the IMF.
• We believe it is critical that countries incurred in debt need to take measures to anchor expenditure. When there are fiscal issues there is need to find the solution. These do not always mean fiscal consolidation (they can take expending more efficient and can get additional funding from international community)
• IMF’s approach is macro critical: We estimate what countries need to expend to reach a decent point within the Sustainable Development Goals. We found enormous need (close to 15% GDP annually to achieve SDGs).
• We observed the need for government expending to be efficient and to have services delivered.
• The IMF engage in these issues in policy advice, ensuring fiscal sustainability:
• Three principles when engaging with countries on government, employment and compensation:

1. 1. Critical government wages are competitive. They need to have a decent spending in key areas.
   2. Government wages need to fit in fiscal frameworks, be able to prioritise and put the money in key things like social services
   3. IMF has promoted government role during the pandemic, supporting health expenses, for example

Alberto Rodriguez

• What matters to us is people, especially poor and disadvantaged.
• The World Bank supports public sector. It has provided 2.5 million dollar to countries to support poorest.
• Covid has been the most relevant crisis in people’s memories – Poverty index from 50 to 70%, set back in education will cost this generation about 7 trillion in future earnings.
• We have moved out from responding to a crisis to trying to support the poorest.
• We have supported 89 countries with vaccines doses, 49 in Africa.
• If we do not fix and recover from the pandemic, the impact will be felt for decades.
• Basic equipment and health facilities – 25 % of facilities around the world lack features to be an effective health facility.
• There are situations where countries with high level of inequality can come together to support gender delivery.
• The effect of the pandemic is so high that it is critical to bring every possible option to the table.
• There are examples of great success on work between private and public sector. We work with strong regulatory frameworks in these cases. In particular, in education, governments are complex to set up regulatory frameworks.

Q&A

Q: David Archer (ActionAid) – it is true there’s been a bit of support to countries to open-up to public services during the pandemic, but then a rapid return to fiscal consolidation in country programmes. We are seeing a return to austerity. Public sector bill should be central – expending on social services is not protected. In our study we see relentless push by IMF and ministers to cut expenses of GDP in public sector. Every single country was encouraged by the IMF to reduce percentage of GDP in social services expending below the global average.

We are asking for a real commitment for advice to increase in expenses in public services.

A: Mauricio Soto: most of our analysis is country-specific. In Nigeria for example, very few resources are collected by the public sector. Without investment you would not have growth needed to build services. Large resources are needed to achieve the SDGs. Financing will be challenging. IMF’s role is to give policy advice to get to these goals. ActionAid report was put on the table and gave some ideas on how to do it. Consensus, good governance and state capacity are critical to deliver good health and education systems. Public sector plays a very important role – it is the government who decides the balance between private and public.

A: Alberto Rodriguez – two thrids of low- and lower-income countries have cut their public education budget since Covid 19. We need to make sure governments understand that the impact of this pandemic is so high that efforts are needed to recover (including private sector, CSOs, religious orgs…). Governments cannot do all this by themselves.

Q: Allana Kembabazi – I am hoping BWIs rhetoric they mentioned on supporting countries to expend more in social services is real and happens. The World Bank continue to promote the idea that private sector is more effective. On the IMF side, in Uganda, for example, is not doing nothing to support Uganda expenses in public services. Covid hit after years of pushing the government to consolidate more and cut on public services. Loans need to be back. These are still not used to protect and promote public services improvements. The World Bank needs to double pre-covid financing. We want to see some real actions – need a 360 of the PPP issue. Could we put a target GDP expenses from counties on public services?

A: Alberto Rodriguez – latest World Development Report showed private schools do not deliver better services. There are many places where the presence of private schools enhance services (because government, access, for example).

Regarding the GDP target of investments, there are technical reasons (countries budgets are very different so this does not make sense – for some countries may be too small, for others too big)

Q: Katie Malouf (Oxfam) – We acknowledge the value of the World Bank’s human capital project. Making the case for finance ministers to acknowledge the importance of social services such as education, but still supporting programmmes that undermine public services. For example, World Bank’s education portfolio (one fitfth of the Bank’s education programmes include some level of privatization via PPPs). What do you see as the opportunities for the WB to really provision of public services?

A: Alberto Rodriguez – we rethink how governments expend their money

Q: Maria Jose Romero (Eurodad) – We welcome the call from the World Bank for more resources for human development.

Development Policy Lending – welcome on paper because many developing countries need support for development. But research shows there is a heavy reliance of the Bank’s response to Covid on DPL, such as conditionalities (including IMF policy advice on fiscal consolidation). In light of the Bank’s findings on their retrospective, what is the Bank planning to do differently in the way they promote DPLs and approach to public services

Q: Johnstone – About education in Kenya. Most of Kenyan private school are not following government advice.

1. The bank needs to help the government to develop public education services.
2. Climate crisis – people dying because of draught. How can BWIs help with prgrammes to assess these issues.
3. Corruption – most funds go to corruption. How can BWIs help with mechanisms of control?

(There was no time left to respond to the last two questions)

Closing remarks

Nyaradzayi Gumbonzvanda – BWIs need to open the space for effective participation, CSO consultation. Transparency in the conversation is critical. It is very important that we assess the issue between policy advice and in country actions. We need action in tax regimes, progressive taxes, wealth taxation. I encourage the CSO forum to continue.