The International Monetary Fund’s advice to cut government spending in the global south has wiped nearly $10 billion from public sector wage budgets in just 15 countries – the equivalent of cutting more than 3 million essential jobs, such as teachers, nurses and doctors, despite the growing need for such professionals during the pandemic.
As G20 finance ministers meet for the IMF annual meetings today (12 October), the research reveals that despite IMF claims that wage bill containment is a temporary measure, all the 15 countries studied have been advised to cut or freeze public sector wage bills for three or more years and most for at least five years.
The report, The Public Versus Austerity, shows how cutting budgets used to pay public sector workers is undermining progress on health, education and gender equality while blocking Covid-19 responses and the transformations needed to address the climate crisis.
Rosa Pavanelli, General Secretary of Public Services International says:
“The disastrous consequences for public services of the IMF's commitment to austerity have been exposed by this pandemic. Understaffing and lack of public investment have pushed frontline workers into dangerous and devastating situations, struggling to provide the vital care and quality services their communities need and deserve. To restore its credibility, it's time for the IMF to implement a deep institutional shift, away from austerity and towards policies which bolster our public services and support the workers who provide them."
Analysis of IMF documents, including Article IV reports that provide policy advice which shape countries’ economies for years, also reveals how data is being misused at country level to drive down public employment funding. It finds that countries with wildly different spending on public sector wages as a percentage of GDP were all advised to make cuts, from Zimbabwe with 17% of GDP to Nigeria with just 1.8% of GDP. Despite these huge variations, the IMF’s advice is consistently to cut spending.
Out of 69 IMF documents examined, only Liberia’s included calculations on existing staffing shortfalls in the education and health sectors – despite such information being of vital importance in determining public employment funding levels.
Liberia’s Article IV report showed the country’s ratio of health professionals per 10,000 people is only five, compared to the World Health Organisation target of 41. Yet despite the clear need for more public service workers across a range of sectors, Liberia was still advised to make a 1.1 percentage point cut to the public sector wage bill.
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The report comes just weeks after the World Bank ditched its annual Doing Business report following calls from civil society for change and a damning investigation, which revealed significant internal bias and data manipulation.
The research by ActionAid and partners further highlights the need for reform at both institutions, towards a new policy direction which revalues the role of public employment and services in fostering development and growth.
Julia Sánchez, Secretary General at ActionAid International, says:
“The IMF’s use of public sector wage bills cuts is blunt and directionless. Our research found there was no serious assessment of shortages of key workers in health and education to inform cuts or freezes, and no attempt to project the impact of wage bill constraints. Instead, IMF documents we analyzed used questionable data and inappropriate country comparisons to drive down wage spending.
“A just, green and feminist recovery from Covid-19 and the transition to carbon-neutral economies require more investment in the public sector to create green and decent jobs, especially for women who bear the brunt of the pandemic, economic slowdowns and the climate crisis.”
Doctors, nurses and teachers from the countries involved in the study, including Nigeria, Brazil and Bangladesh, shared shocking accounts of fragile health and education systems brought to their knees during the height of Covid-19 due to shortages of key workers.
In Nigeria, Abigail* is one of two midwives working in chaotic conditions at a healthcare centre in Abuja.
“According to World Health Organisation standards, a nurse is expected to handle four patients, but here in our healthcare facility we have nearly 150 women here today and there are only two nurses on duty,” Abigail says.
“We work and we work, but it is making us unwell. When you are stressed, you cannot give your best care to the patients. Sometimes we are not paid at the end of the month, yet we are expected to report to work every day acting normal and attending to the patients like we have no problems. I cannot afford the school fees for my kids and I have had to withdraw them. I am hoping things will get better.”
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In Zimbabwe, teachers’ salaries (around ZWL$28,666, or US$335 per month) are less than the total consumption poverty line, the amount needed to buy enough food and non-food items to support a family of five month.
Farai*, a teacher from Zimbabwe says: “Our wages feel like slave wages, teachers are facing so many challenges. We are suffering from stress and surviving teachers feel as if they have become beggars. Morale is at its lowest.
“We have become a laughingstock in society, living from hand to mouth. We go to work in tattered clothes, and we are living in squalid conditions. In the worst-case scenarios, some teachers have resorted to shoplifting to survive. I have heard of marriages breaking down. But through this all we are still reporting for duty.”
Broken austerity policies such as wage bill containment, highlight how the IMF has undermined public services and prevented countries responding to multiple crises, such as the climate crisis and the Covid-19 pandemic.
Across the 15 countries studied, if governments were to raise the amount of GDP spent on the public sector wage bill by just one percentage point this would allow for the recruitment of eight million extra doctors, nurses, teachers and other key workers.
David Edwards, General Secretary at Education International says: “Public sector wage bill constraints have a devastating effect in the education sector. When the teacher wage bill is cut, students’ right to quality education is threatened by a lack of qualified teachers and unacceptably large class sizes. Given the global teacher shortage and rising attrition levels due to the pandemic, the IMF should be supporting low and lower-middle income countries to recruit and retain more well trained and highly qualified teachers rather than pushing for countries to reduce their spending on these workers that are so crucial for countries’ post-pandemic recovery. Teachers are key for quality education and are crucial for achieving the global goal to ensure inclusive education for all.”
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Notes to editors:
*The names of doctors, nurses, teachers and other public sector workers quoted in the research have been changed to protect their identities.
The research focused on 15 countries where ActionAid supports public sector workers, including: Bangladesh, Brazil, Ghana, Kenya, Liberia, Malawi, Nepal, Nigeria, Senegal, Sierra Leone, Tanzania, Uganda, Vietnam, Zambia and Zimbabwe.
A total of 69 IMF Article IV and loan documents were analysed. Researchers identified all Article IV Staff Reports (and published accompanying documentation) from 2016 onwards via the IMF Country Information pages, between May and July 2021.
Analysis of the IMF's database of lending commitments, accessed between May and July 2021, was used to identify loans that are active, and/or have been active over the last five years, and then searched for the most recent Request and Review documents relating to these loans.
Researchers tracked trends and the IMF’s advice steer in each financial year using a traffic lights database.
ActionAid analysed this data to calculate the cost of IMF advice to cut the public sector wages bill for each country in US$ and how this relates to potential job losses of public sector workers. We used data from the World Bank's World Development Indicators database combined with salary data taken from the payscale.com and salaryexplorer.com salary comparison websites. A full breakdown of this approach is also available in the methodology note.
More details on the report’s methodology can be found here.