As global cost of living, inflation and inequality spike, austerity measures are sweeping across the world at record levels and public services face cutbacks, with dire consequences. In this context, pre-existing concerns are growing about the World Bank and IMF’s focus on market-based solutions, including its impact on accountability at the World Bank.
October’s World Bank and IMF Annual Meetings in Morocco were an opportunity for the Bretton Woods Institutions (BWIs) the World Bank and IMF, to respond to warnings from civil society organisations (CSOs) and other critics about the impact of austerity measures on the provision of essential basic public services to billions of people. Despite evidence, testimonies and viable alternatives being offered, World Bank President Ajay Banga and IMF Managing Director Kristalina Georgieva remained adamant during the meetings that private finance is essential to bridge what they stress is a significant financing gap (see Dispatch Annuals 2023). Solutions such as increases in public finance, tax reform and tackling illicit financial flows, donor compliance with Official Development Assistance targets, climate finance and debt cancellation were glossed over, with the BWIs instead focusing on ‘crowding in’ private finance with the likes of a Private Sector Investment Lab at the Bank.
Privatised public services fraught with equity and quality challenges
The International Finance Corporation (IFC), the World Bank’s private sector arm, faces particular scrutiny as evidence of harmful practices under IFC-funded projects mounts, including the recent Bridge International Academies scandal (see Observer Winter 2023). The 2023 Annual Meetings offered fresh evidence of IFC-backed harm, in this case to healthcare services, following a damning June report by Oxfam International titled Sick Development. The report maps financing flows between development finance institutions (DFIs), including the World Bank to for-profit private healthcare providers in the Global South. Illustrated by in-depth case studies in India and Kenya, Oxfam found that DFI promises to advance universal health coverage and protect rights were not fulfilled. Instead, taxpayers’ money earmarked for fighting poverty and achieving development goals, given DFIs are publicly financed, is being used to back expensive, for-profit private hospitals that deny service to, bankrupt, or even detain patients who cannot pay. Noting that the Bank has a mandate to help deliver the Sustainable Development Goals, reduce poverty and support inclusive growth, the report exposes serious harm to patients in IFC-funded hospitals, a lack of transparency of investments, questionable flows of taxpayer money into tax havens, and the ultimate failure of IFC healthcare investments to provide adequate support to those who need it most, i.e. the poorest and most vulnerable.
The Fund should hear civil society calls for universal support of mothers and children, the disabled and the elderly, funded through sufficient progressive taxation, supplemented with international assistance in the poorest countries and during catastrophes.Barry Herman, Social Justice in Global Development
The report noted that the “IFC has been at the vanguard of the drive to use public funds to maximize the role of both private finance and commercial providers in healthcare systems in the Global South,” adding, “what is lacking is a clear and evidenced theory of change as to how DFI investments in for-profit private healthcare providers will succeed in advancing pro-poor and gender-equitable access to quality healthcare without financial hardship.”
In a Civil Society Policy Forum (CSPF) event at this year’s Annual Meetings titled Development finance to for-profit private healthcare: What implications for uhc, human rights and gender equality?, IFC representative Charles Dalton responded to a presentation from the report’s lead author, Anna Marriott of Oxfam, by noting the IFC accepts such findings are unacceptable and will investigate them fully. Yet, he stressed, a solution to healthcare needs must be found and unfortunately fiscal consolidation is an inevitability. Dalton responded that he was “personally upset and annoyed by the stories” and admitted that IFC “could do better. The private sector doesn’t have all the solutions and IFC doesn’t say this. But the demand to supply is so big and we have to think outside the box.”
Yet, leading global institutions disagree that private finance is the missing piece in healthcare and other public services. The World Health Organisation (WHO) guidance on achieving universal healthcare, for instance, states that “countries should reduce their reliance on private financing and instead progress towards primarily publicly funded healthcare, because it leads to better efficiency, effectiveness and equity.”
Fiscal consolidation, austerity’s partner in crime
Human Rights Watch has also published other critical research exploring the IMF’s approach to tackling inequality. A September paper, Bandage on a Bullet Wound, analysed 39 IMF loan programmes from the beginning of the Covid-19 pandemic to March 2023 to assess the Fund’s response to crises through a human rights lens. It found an overwhelming preference for fiscal consolidation and stressed that this is the case despite the fact that the IMF’s own 2023 World Economic Outlook concluded that, “On average, fiscal consolidations do not reduce debt-to-GDP ratios.”
An Autumn 2023 paper by Barry Herman of Germany-based CSO Social Justice in Global Development, titled IMF has a new policy on social spending: How should the Fund implement it?, analysed how the IMF offers advice and determines policy requirements for IMF loans under its new social spending strategy. The paper noted “recent country programs and recent advice in Article IV consultations still embody an unwarranted degree of austerity, negatively impacting the poor and vulnerable citizens in affected countries.” Herman noted that the Fund identifies key criteria for assessing social spending programmes: adequacy, efficiency and fiscal sustainability. Herman commented, “Good, and now the Fund should hear civil society calls for universal support of mothers and children, the disabled and the elderly, funded through sufficient progressive taxation, supplemented with international assistance in the poorest countries and during catastrophes.”
Amid ongoing discussions about global governance and increasing concerns about peace and stability (see Observer Winter 2023), the reports foretell a harsh future for borrowing countries: Crumbling public services and state capacity and related loss of trust in public institutions, little debt reduction and negative human rights impacts on billions.
