A new Oxfam report released in advance of the 2024 Spring Meetings in Washington, D.C., states that income inequality is high or rising in 60% (64 out of 106) of low- and middle-income countries that receive grants or loans from the International Monetary Fund (IMF) and World Bank. The United Nations’ alert level of 0.4 is exceeded by the Gini coefficients of nations with high levels of income inequality.
“The IMF and World Bank say that tackling inequality is a priority but in the same breath back policies that drive up the divide between the rich and the rest. Ordinary people struggle more and more every day to make up for cuts to the public funding of healthcare, education and transportation. This high stakes hypocrisy has to end,” said Kate Donald, Head of Oxfam International’s Washington D.C. Office.
“Agreement last year by the World Bank to target cuts in inequality for the first time in its 80-year history is a landmark move. But if the Bank is serious about tackling inequality, the first test will be making it a headline priority for its lending to the world’s poorest countries, being discussed now at the Spring Meetings,” said Donald.
Donor contributions to the Bank’s International Development Association (IDA), which provides grants or low-interest loans to the world’s poorest countries, over half of which are in Africa, have flatlined in recent years despite growing needs. World Bank President Ajay Banga has called on donor governments to make the next IDA replenishment the “largest of all time.”
Low-income countries also face a debt crisis, making an ambitious IDA21 replenishment all the more urgent. Ballooning debt and interest repayments are diverting scarce resources from crucial areas like public education and healthcare and social safety nets, threatening to unravel hard-won development gains. Based on World Bank analysis, Oxfam finds that half of IDA-eligible countries are overindebted and need nearly half (45 percent) of their debt cancelled.
Raising taxes on the wealth and income of the wealthiest might generate trillions of dollars to close the massive financing gaps in low- and middle-income nations for development and climate change, as well as to patch shortfalls in IDA funding. Unlocking this investment may be aided by the G20 Finance Ministers’ meeting in Washington, D.C. at the Spring Meetings. The current G20 Chair, Brazil, has advocated for a global strategy to guarantee that the world’s wealthiest individuals pay their fair amount of taxes. Since then, France has lent its support. Any worldwide agreement must guarantee that the ultra-wealthy pay taxes at a pace that is sufficiently aggressive to reduce inequality. To lower the wealth of billionaires, for instance, a yearly net wealth tax of more than 8 percent would be required.
“We don’t buy the excuse that ‘we can’t afford it’ —the money is there; it’s just not flowing to where it’s needed. We urgently need donor governments to step up their contributions to IDA, and for the G20 to move forward with a global deal to tax the super-rich. It’s all part of ensuring that rich countries and rich people pay their fair share towards tackling inequality and climate breakdown,” said Donald.
