“Dispiriting, dangerous, anti-development” education and health cuts by nearly every country with World Bank and IMF loans

94 percent of countries (94 out of 100 countries) with current World Bank and International Monetary Fund (IMF) loans have cut vital investments in public education, health and social protection over the past two years, according to a new report published today by Oxfam and Development Finance International (DFI).

The figure is even higher for International Development Association (IDA) countries, the world’s poorest countries —95 percent (40 out of 42 countries) have pursued such cuts.

“These cuts are not just dispiriting; they’re dangerous and fundamentally anti-development,” said Kate Donald, Head of Oxfam International’s Washington DC Office. “Too many Global South countries are facing the agonizing choice between investing in education and health or adopting austerity measures to keep up with crushing debt payments. These decisions come at a terrible human cost —millions of people depend on public services to thrive and build better lives for themselves and their children.”

“Last year, we applauded the World Bank for finally making inequality an institutional priority. But our latest findings show that both the Bank and IMF have a lot of work to do if they are to genuinely contribute to tackling inequality rather than perpetuate it,” said Donald.

In 2023, under growing pressure from economists, shareholders and civil society, the World Bank introduced its first-ever “vision indicator” aimed at reducing the number of countries with high inequality (Gini of 0.4 or above). Despite this step forward, the Bank has watered down previous commitments to support progressive taxation, including increased taxation of the super-rich. Tackling inequality has so far not been incorporated into the policy framework for the upcoming replenishment of the Bank’s IDA, which provides grants or low-interest loans to the world’s poorest countries, over half of which are in Africa. Inequality is high or increasing in 54 percent of countries that receive funds from IDA.

Using the latest data from government budgets, the “Commitment to Reducing Inequality (CRI) Index 2024” ranks 164 governments on their policies regarding public services, tax, and workers' rights —policies central to reducing inequality. This year’s edition shows that, for the first time since the Index began in 2017, the majority of countries are backsliding across all the three critical areas.

Overall, 84 percent of countries have cut investment in education, health and social protection, 81 percent weakened their tax systems’ ability to reduce inequality, and in 90 percent of them, labour rights and minimum wages have worsened.

Some countries have improved their ranking since 2022. Burkina Faso and Vanuatu increased their minimum wage, Croatia boosted investment in health, and Guyana retains one of the highest corporate tax rates (40 percent).

Others have fallen sharply, including Argentina whose new government has slashed public health and education budgets by 76 percent and 60 percent, respectively, and is phasing out the country’s wealth tax. Pakistan has cut education and social protection budget shares by a third under IMF-imposed austerity measures.

Even the top performers, high-income countries led by Norway and Canada, are lagging in many indicators. Around 5 percent of their populations face catastrophic out-of-pocket healthcare costs. Excepting Japan, most have low rates of corporate income tax. Denmark has been cutting the income tax rate paid by the richest 1 percent for years.

The bottom performers in the Index remain dominated by those from Sub-Saharan Africa (all countries in the region have World Bank and IMF programs). In addition to low tax revenues, the debt crisis, conflict and climate breakdown are diverting scarce resources from education, health and social safety nets. On average, low- and middle-income countries are spending 48 percent of their budgets on debt service, far more than they do on education and health combined. Six of the bottom ten countries are in or at high risk of debt distress.

Higher taxes on the income and wealth of the super-rich could raise trillions of dollars to plug financing gaps for public services in low- and middle-income countries. At the G20 finance ministers’ meeting in July 2024, for the first time in history, the world’s largest economies agreed to cooperate to tax the ultra-rich, a move welcomed by President of the World Bank Ajay Banga.

“The world's governments are doing even less to fight inequality, exacerbating extremism and undermining growth. With the World Bank adopting a new anti-inequality target, the World Bank and IMF have a new opportunity to champion policies which cut inequality —free public services, fairer tax systems, and stronger workers' rights. They must seize this with both hands,” said Matthew Martin, Executive Director of DFI.