UN independent expert: “IMF programmes worsen income distribution”

5 April 2016

In early March the UN independent expert on the effects of foreign debt on human rights, Juan Pablo Bohoslavsky, presented his latest report to the 31st session of the Human Rights Council in Geneva. The report focused on the linkages between income and wealth inequality, financial crises, and their implications on the enjoyment of human rights. According to Bohoslavsky, not only have financial adjustment programmes without consistent debt relief proved detrimental to human development and human rights, but inequality may also substantially contribute to and exacerbate the emergence and course of financial crises. Bohoslavsky used Latin America as an example, where the IMF ran loan programmes in 16 countries in the 1980s, and “where the costs of the financial crises were not borne equally and most adjustment programmes resulted in ‘overkill’ leading to increases in poverty and inequality beyond what was necessary”. The report concluded, “what seems clear is that IMF programmes are associated with a worsening of income distribution and a reduction in the incomes of the poorest citizens when external imbalances were high prior to the programme. These programmes may only decrease income inequality when external imbalances are less severe”.

To support policymakers to meet their international human rights obligations, the report recommended a range of measures for tackling financial crises and inequality in an integrated manner. For instance, instruments for improving pre-tax income equality should be employed; sufficient bargaining power of the workforce should be safeguarded; and reform aimed at enhanced progressive taxation should be implemented. The report stressed that any response to financial crises must fully comply with human rights law; that fiscal stability and GDP growth may not overrule, suspend or dilute existing human rights obligations and responsibilities; and that the protection of vulnerable groups must have the highest priority, ensuring that social spending is affected last and the least. The report also recommended that debt sustainability analyses should incorporate inequality as a crucial consideration, ensuring that debtor states are able to fulfil their human rights obligations. While the report makes no recommendations specific to financial institutions, the World Bank and IMF’s Debt Sustainability Framework currently does not include inequality as an indicator for its analyses (see Update 54).

What seems clear is that IMF programmes are associated with a worsening of income distributionJuan Pablo Bohoslavsky, UN Independent Expert on Foreign Debt

Reacting to the report, Rasha Rashid Jarhum, founder of Yemeni Youth for Humanitarian Relief and the Aden Initiative, stated that “the harmful impacts of IMF conditionalities on human rights highlighted in the report are especially acute in Yemen as they exacerbate the endemic corruption and political instability my country suffers from. In such a context, proposed reforms are subject to political abuse and manipulation, which, in Yemen, ultimately led to the violent turbulence we are witnessing today.” She further emphasised that “it is important international financial institutions also address the issue of how their policies are implemented in countries that are suffering from corruption and dictatorship especially, so that those policies won’t be used to enhance inequality and exacerbate human rights abuses even further”.