World Bank, IMF Must Prioritize Wealth Tax and Canceling Debt to Tackle Global Inequality

With world leaders convening in Washington, D.C. this week for the annual Spring Meetings of the International Monetary Fund and World Bank, global anti-poverty campaigners said Monday that delegates from the world's largest economies must prioritize taxing the superrich and taking other steps to alleviate rampant inequality in the Global South.

Oxfam International revealed that based on the World Bank's analysis of worldwide inequality and poverty, 64 out of 106 low- and middle-income countries that receive grants and loans from the bank and the IMF have high or increasing rates of income inequality.

Sixty percent of countries that are eligible for grants or low-interest loans from the International Development Association (IDA) have ratings above 0.4 on the Gini coefficient scale—a warning level developed by the United Nations. The scale rates more equal countries closer to 0 and countries with high income and wealth disparities closer to 1, with rating above 0.4 signifying high levels of income inequality.

Kate Donald, head of Oxfam International's Washington, D.C. office, noted that the news comes less than a year after more than 200 worldwide economists successfully pressured the World Bank to set a new goal of reducing the number of countries with high inequality rates.

The agreement was "a landmark move," said Donald. "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."

According to Oxfam's analysis, half of IDA-eligible countries are overindebted and need roughly 45% of their debt to the banks canceled in order to address surging inequality in their own communities.

The global financial institutions must prove at the Spring Meetings that "tackling inequality is a priority," said Donald.

"Ordinary people struggle more and more every day to make up for cuts to the public funding of healthcare, education, and transportation," she said. "This high stakes hypocrisy has to end."

At Inter Press Service, Jaime Atienza, equitable financing director at the Joint United Nations Program on HIV/AIDS, pointed to the example of Zambia, one of 37 countries identified by Oxfam as facing rising levels of inequality.

While still struggling, Atienza wrote, through the G20 Common Framework on Debt, Zambia "secured serious debt relief and restructuring with both government and private creditors, which will help enable vital and urgent investments in health, education, and social protection."

"For too long, Zambia's plans for ending AIDS as a public health threat by 2030, and for realizing crucial development needs, have been held back by constraints in investment caused by the debt crisis," wrote Atienza. "The debt relief and restructuring that has been agreed at last gives the country a fighting chance. All those who have facilitated this agreement have saved and transformed lives."

In dozens of countries in the Global South, said Oxfam, "ballooning debt and interest repayments are diverting scarce resources from crucial areas like public education and healthcare and social safety nets."

Both Atienza and Oxfam said delegates from G20 countries, the world's largest economies, must center at the Spring Meetings Brazil's call for a global plan to require wealthy people to pay their fair share in taxes.

"Higher taxes on the income and wealth of richest could raise trillions of dollars to plug IDA funding shortfalls and to fill the huge development and climate funding gaps in low- and middle-income countries," said Oxfam, which noted that the net wealth of billionaires must by taxed more than 8% annually to help reduce inequality in the worst-affected countries.

Wealthy governments must also increase their donations to the IDA, said Donald, which have flatlined in recent years despite growing needs in African countries and throughout the Global South.

"We don't buy the excuse that 'we can't afford it,'" she said. "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," she added, "towards tackling inequality and climate breakdown."