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'A Very Dark Picture': IMF Warns Trump's Iran War Could Unleash Global Recession
One expert called the new IMF forecast "extremely concerning for the global economy," noting that "the most dire impacts of our economic situation will be felt by the poor and the vulnerable."
Apr 14, 2026
The International Monetary Fund warned Tuesday that the US-Israeli war on Iran could slow global economic growth, stoke inflation, and increase the possibility of a worldwide recession and energy crisis.
The illegal war of choice on Iran being waged by US President Donald Trump and the government of fugitive Israeli Prime Minister Benjamin Netanyahu has already had wide-ranging negative impacts on the global economy, from soaring fuel prices caused by the closure of the Strait of Hormuz to supply chain disruptions and financial market volatility.
However, a major global economic crisis has thus far been averted. That could soon change.
"Despite major trade disruptions and policy uncertainty, last year ended on an upbeat note," International Monetary Fund director of research Pierre-Olivier Gourinchas wrote in an analysis of the IMF's latest World Economic Outlook report. "The private sector adapted to a changing business environment, while powerful offsets came from lower US tariffs than originally announced, some fiscal support, and favorable financial conditions coupled with strong productivity gains and a tech boom."
"Despite some downside risks, the momentum was expected to carry over into 2026, lifting the pre-conflict global growth forecast to 3.4%," Gourinchas continued. "War in the Middle East has halted this momentum. The closing of the Strait of Hormuz and serious damage to critical facilities in a region central to global hydrocarbon supply raise the prospect of a major energy crisis should hostilities continue."
The IMF said that even if the war ends quickly, lasting damage to the world's economy will still happen.
According to the IMF report:
Under the assumption of a limited conflict, global growth is projected at 3.1% in 2026 and 3.2% in 2027, below recent outcomes and well under pre-pandemic averages. Global inflation is expected to tick up in 2026 and resume its decline in 2027. Pressures are concentrated in emerging market and developing economies, especially commodity importers with preexisting vulnerabilities. Risks are decisively on the downside. A prolonged conflict, deeper geopolitical fragmentation, disappointment over [artificial intelligence]-driven productivity, or renewed trade tensions could weaken growth and unsettle markets. High public debt and eroded policy buffers add vulnerability. Policies should foster adaptability, enhance credibility, and reinforce international cooperation.
The IMF said that "the shock’s ultimate magnitude will depend on the conflict’s duration and scale—and how quickly energy production and shipment normalize once hostilities end," and that effects will vary by location.
"Countries will feel the impact differently," Gourinchas wrote. "As in past commodity-price surges, importers are highly exposed. Low-income and developing economies—especially those with vulnerabilities and limited buffers—are likely to be hit hardest. Gulf energy exporters will face economic fallout from damaged infrastructure, production disruptions, export constraints, and weaker tourism and business activity. Remittances will fall in countries that supply migrant workers to the region."
Eric LeCompte, executive director of the religious development group Jubilee USA Network and a United Nations finance expert, called the new IMF forecast "extremely concerning for the global economy," lamenting that "the most dire impacts of our economic situation will be felt by the poor and the vulnerable."
The new report comes as the IMF's annual Spring Meetings are underway in Washington, DC.
“World leaders coming to Washington are receiving a very dark picture of the global economy,” said LeCompte. “The war is causing greater poverty and increases in our fuel and food costs."
Other groups have also warned of the adverse economic effects of the US-Israeli war on Iran.
Ben May, Bridget Payne, and Paul Moroz of Oxford Economics recently published a report warning that a longer war in Iran "could tip the global economy into recession."
In such a situation, "the Gulf states suffer most acutely—GDP down over 8% in 2026—before rebounding sharply as production recovers," they wrote. "Advanced Asian economies, which are especially reliant on Gulf oil, take a heavy blow from energy import cost surges and supply chain disruption."
"Europe faces a painful squeeze on gas and electricity," the trio added. "The US fares somewhat better given its domestic energy production, but an equity market decline of nearly 20% weighs heavily on consumer spending."
Some US-based organizations have focused on the war's domestic economic impacts.
Dean Baker, a senior fellow at the Center for Economic Policy Research, published an analysis earlier this month asserting that "making enemies makes us poorer."
"Secretary of Defense (or War) Pete Hegseth seems to be having a really great time killing people in Iran, but his live action video games come at a big cost—not just in lives, but in budget dollars," Baker wrote. "To be clear, the main reason to oppose this pointless war is its impact on the people of Iran and elsewhere in the region. But it also has a huge economic cost that is seriously underappreciated."
"In addition to reducing our security and jeopardizing the well-being of people around the world, Donald Trump’s belligerence will cost us a huge amount of money," he said. Focusing on US military spending, Baker noted that "Trump wants the country to spend 5% of GDP, or $1.5 trillion a year, on the military. This comes to $12,000 per household."
Trump and his Republican Party are seeking to offset some of their record military spending with devastating cuts to social programs upon which tens of millions of Americans rely. Already reeling from the biggest cuts to Medicaid and Supplemental Nutrition Assistance Program spending in those programs' histories, Trump’s budget request for fiscal year 2027 contains $73 billion in total reductions in nondefense spending.
"It is striking to see that Congress might be willing to quickly cough up this money," said Baker, referring to military funding, "when it has refused far smaller sums that could have made a huge difference in the lives of tens of millions of people."
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The Perils and Promise of the Emerging Multipolar World
The world economy is experiencing a deep process of economic convergence, according to which regions that once lagged the West in industrialization are now making up for lost time.
Jun 06, 2024
The World Bank’s release on May 30 of its latest estimates of national output (up to the year 2022) offers an occasion to reflect on the new geopolitics. The new data underscore the shift from a U.S.-led world economy to a multipolar world economy, a reality that U.S. strategists have so far failed to recognize, accept, or admit.
The World Bank figures make clear that the economic dominance of the West is over. In 1994, the G7 countries (Canada, France, Germany, Italy, Japan, U.K., U.S.) constituted 45.3% of world output, compared with 18.9% of world output in the BRICS countries (Brazil, China, Egypt, Ethiopia, India, Iran, Russia, South Africa, United Arab Emirates). The tables have turned. The BRICS now produce 35.2% of world output, while the G7 countries produce 29.3%.
As of 2022, the largest five economies in descending order are China, the U.S., India, Russia, and Japan. China’s GDP is around 25% larger than the U.S.’ (roughly 30% of the U.S. GDP per person but with 4.2 times the population). Three of the top five countries are in the BRICS, while two are in the G7. In 1994, the largest five were the U.S., Japan, China, Germany, and India, with three in the G7 and two in the BRICS.
Despite the new global economic realities, the U.S. security state still pursues a grand strategy of “primacy,” that is, the aspiration of the U.S. to be the dominant economic, financial, technological, and military power in every region of the world.
As the shares of world output change, so too does global power. The core U.S.-led alliance, which includes the U.S., Canada, U.K., European Union, Japan, Korea, Australia, and New Zealand, was 56% of world output in 1994, but now is only 39.5%. As a result, the U.S. global influence is waning. As a recent vivid example, when the U.S.-led group introduced economic sanctions on Russia in 2022, very few countries outside the core alliance joined. As a result, Russia had little trouble shifting its trade to countries outside the U.S.-led alliance.
The world economy is experiencing a deep process of economic convergence, according to which regions that once lagged the West in industrialization in the 19th and 20th centuries are now making up for lost time. Economic convergence actually began in the 1950s as European imperial rule in Africa and Asia came to an end. It has proceeded in waves, starting first in East Asia, then roughly 20 years later India, and for the coming 20-40 years in Africa.
These and some other regions are growing much faster than the Western economies since they have more “headroom” to boost GDP by rapidly raising education levels, boosting workers’ skills, and installing modern infrastructure, including universal access to electrification and digital platforms. The emerging economies are often able to leapfrog the richer countries with state-of-the-art infrastructure (e.g., fast intercity rail, 5G, modern airports and seaports) while the richer countries remain stuck with aging infrastructure and expensive retrofits. The IMF’s World Economic Outlook projects that the emerging and developing economies will average growth of around 4% per year in the coming five years, while the high-income countries will average less than 2% per year.
It’s not only in skills and infrastructure that convergence is occurring. Many of the emerging economies, including China, Russia, Iran, and others, are advancing rapidly in technological innovations as well, in both civilian and military technologies.
China clearly has a large lead in the manufacturing of cutting-edge technologies needed for the global energy transition, including batteries, electric vehicles, 5G, photovoltaics, wind turbines, fourth generation nuclear power, and others. China’s rapid advances in space technology, biotechnology, nanotechnology, and other technologies is similarly impressive. In response, the U.S. has made the absurd claim that China has an “overcapacity” in these cutting-edge technologies, while the obvious truth is that the U.S. has a significant under-capacity in many sectors. China’s capacity for innovation and low-cost production is underpinned by enormous R&D spending and its vast and growing labor force of scientists and engineers.
Despite the new global economic realities, the U.S. security state still pursues a grand strategy of “primacy,” that is, the aspiration of the U.S. to be the dominant economic, financial, technological, and military power in every region of the world. The U.S. is still trying to maintain primacy in Europe by surrounding Russia in the Black Sea region with NATO forces, yet Russia has resisted this militarily in both Georgia and Ukraine. The U.S. is still trying to maintain primacy in Asia by surrounding China in the South China Sea, a folly that can lead the U.S. into a disastrous war over Taiwan. The U.S. is also losing its standing in the Middle East by resisting the united call of the Arab world for recognition of Palestine as the 194th United Nations member state.
Yet primacy is certainly not possible today, and was hubristic even 30 years ago when U.S. relative power was much greater. Today, the U.S. share of world output stands at 14.8%, compared with 18.5% for China, and the U.S. share of world population is a mere 4.1%, compared with 17.8% for China.
The trend toward broad global economic convergence means that U.S. hegemony will not be replaced by Chinese hegemony. Indeed, China’s share of world output is likely to peak at around 20% during the coming decade and thereafter to decline as China’s population declines. Other parts of the world, notably including India and Africa, are likely to show a large rise in their respective shares of global output, and with that, in their geopolitical weight as well.
We are therefore entering a post-hegemonic, multipolar world. It too is fraught with challenges. It could usher in a new “tragedy of great power politics,” in which several nuclear powers compete—in vain—for hegemony. It could lead to a breakdown of fragile global rules, such as open trade under the World Trade Organization. Or, it could lead to a world in which the great powers exercise mutual tolerance, restraint, and even cooperation, in accord with the U.N. Charter, because they recognize that only such statecraft will keep the world safe in the nuclear age.
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Global Cooperation Key to Preventing 'Runaway' Climate and AI Chaos: UN Chief
"Geopolitical divides are preventing us from coming together around global solutions for global challenges," said United Nations Secretary-General António Guterres.
Jan 17, 2024
At the World Economic Forum in Davos, Switzerland on Wednesday, United Nations Secretary-General António Guterres warned that multilateralism that includes often overlooked governments in the Global South is the only solution to the rapidly developing crises posed by the climate emergency and artificial intelligence—both of which are worsening "the global crisis in trust."
"In the face of the serious, even existential threats posed by runaway climate chaos," said Guterres, "and the runaway development of artificial intelligence without guardrails, we seem powerless to act together."
While "droughts, storms, fires, and floods are pummeling countries and communities," particularly in nations that have contributed the least planet-heating fossil fuel pollution, Guterres told the political and business elite assembled in Davos, "countries remain hellbent on raising emissions."
He reserved particular scorn for the United States fossil fuel industry, which—amid the Biden administration's approval of pollution-causing infrastructure including the Willow oil project and the Mountain Valley Pipeline—deceives the public with false climate solutions, misinformation, and greenwashing campaigns "to kneecap progress and keep the oil and gas flowing indefinitely."
As suffering intensifies in communities that are most vulnerable to drought, damage from extreme weather, and other climate catastrophes, Guterres said, fossil fuel giants and powerful governments are risking lives to only delay an "inevitable" shift to renewable energy.
"The phaseout of fossil fuels is essential," said the secretary-general. "No amount of spin or scare tactics will change that. Let's hope it doesn't come too late."
As trust between the Global South and wealthy governments is frayed by fossil fuel-producing countries' refusal to leave oil, gas, and coal behind, Guterres warned that the separate threat of "unintended consequences" of artificial intelligence evolution also looms—for people in rich economies as well as developing countries.
"This technology has enormous potential for sustainable development," said the U.N. chief, while noting that "some powerful tech companies are already pursuing profits with a clear disregard for human rights, personal privacy, and social impact."
Guterres' comments came days after the International Monetary Fund (IMF) released a new analysis of AI's expected impact on the global economy and workers, with nearly 40% of the labor market expected to be "exposed" to AI.
In wealthy countries, about 60% of jobs are projected to be impacted by AI, and about half of those workers are likely to see at least some of their primary tasks being completed by AI tools like ChatGPT or similar technology, "which could lower labor demand, leading to lower wages, and reduced hiring," according to the IMF. "In the most extreme cases, some of these jobs may disappear."
The analysis released Sunday noted that the rapidly changing field could worsen inequality within countries, as some higher earners may be able to "harness AI" and leverage its use for increases in their productivity and pay while those who can't fall behind.
"In most scenarios, AI will likely worsen overall inequality, a troubling trend that policymakers must proactively address to prevent the technology from further stoking social tensions," said the IMF. "It is crucial for countries to establish comprehensive social safety nets and offer retraining programs for vulnerable workers."
Guterres called on policymakers to work closely with the private sector—currently "in the lead on AI expertise and resources"—to "develop a governance model" for AI that is focused on "monitoring and mitigating future harms."
A systematic effort is also needed, said the secretary-general, "to increase access to AI so that developing economies can benefit from its enormous potential."
Along with the IMF and Guterres, global human rights group Amnesty International this week raised alarm about AI and the "urgent but difficult task" of regulating the technology, noting that in addition to changing how people and companies work, AI has the potential to be "used as a means of societal control, mass surveillance, and discrimination."
Police agencies in several countries have begun using AI for so-called "predictive policing," attempting to prevent crimes before they're committed, while officials have also deployed automated systems to detect fraud, determine who can and can't access healthcare and social assistance, as well as to monitor migrants' and refugees' movement.
Amnesty credited the European Union with making headway in regulating AI in 2023, closing out the year by reaching a landmark agreement on the AI Act, which would take steps to protect Europeans from the automation of jobs, the spread of misinformation, and national security threats.
The AI Act, however, has been criticized by rights groups over its failure to ban mass surveillance via live facial recognition tools.
"Others must learn from the E.U. process and ensure there are not loopholes for public and private sector players to circumvent regulatory obligations, and removing any exemptions for AI used within national security or law enforcement is critical to achieving this," said Amnesty.
In Davos on Wednesday, Guterres expressed hope that policymakers will agree on climate, AI, and other solutions that center human rights in the coming year, including at the U.N.'s Summit of the Future, planned for September.
"These two issues—climate and AI—are exhaustively discussed by governments, by the media, and by leaders here in Davos," said Guterres. "And yet, we have not yet an effective global strategy to deal with either. And the reason is simple. Geopolitical divides are preventing us from coming together around global solutions for global challenges."
"The only way to manage this complexity and avoid a slide into chaos," he said, "is through a reformed, inclusive, networked multilateralism."
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Stiglitz to IMF: Give Poor Nations $300 Billion a Year to Fight Climate Crisis
"As the scale of climate change impresses itself more and more on us, we are going to need bolder things," Stiglitz said at the IMF and World Bank's annual meeting in Morocco.
Oct 13, 2023
The International Monetary Fund, or IMF, should give poorer nations $300 billion a year to respond to the climate emergency, Nobel Prize-winning economist Joseph Stiglitz said.
Stiglitz outlined his recommendation in an interview with The Guardian as he attended the fund's annual meeting with the World Bank in Marrakesh, Morocco, which runs from Monday, October 9 to Sunday, October 15.
"As the scale of climate change impresses itself more and more on us, we are going to need bolder things," Stiglitz said.
"When the time comes and we are frying and somebody says: 'How do we get out of the frying pan?,' this [annual SDR allocations] is one way of doing so."
In his call, Stiglitz joined the push for the IMF to release more Special Drawing Rights (SDRs), a reserve asset that can be exchanged for cash. Wealthy nations also have the option of placing their SDRs in a fund for poorer countries.
"Basically, it is printing money," Stiglitz said. "It wouldn't be inflationary but it would be transformative."
Stiglitz' remarks came about a week after nearly 60 U.S. Democratic lawmakers sent a letter to President Joe Biden and Treasury Secretary Janet Yellen asking them to support a new allocation of SDRs. The IMF issued $650 billion in SDRs in 2021 to help with the recovery from the Covid-19 pandemic, and the legislators wanted it to issue the same amount to help nations address the climate crisis, war, and future pandemics.
Stiglitz's call is even bolder at $300 billion a year, because the lawmakers limited themselves to an amount that the IMF could approve without a vote from Congress. While Stiglitz acknowledged his plan was ambitious and unlikely to pass through the current U.S. Congress, it was worth pushing for given the urgency of the moment.
"When the time comes and we are frying and somebody says: 'How do we get out of the frying pan?,' this [annual SDR allocations] is one way of doing so," he told The Guardian.
Stiglitz said the money should be used to help poorer nations fund their equivalent to the U.S. Inflation Reduction Act—which invested $370 billion in renewable energy. But it's impossible for less wealthy countries to make that kind of investment on their own, Stiglitz said.
"Developing countries can't do it on any scale," he told The Guardian. "Unless developing countries and emerging markets reduce their emissions, no matter what pieties we do in the U.S. and Europe, we will get global warming. The rhetoric is about doing something about climate change and then rather than getting onboard [the people] you most need to get onboard, you alienate them."
In a report published Thursday, the Center for Economic and Policy Research (CEPR) agreed that many poorer nations are not in the financial position to take ambitious climate action, and proposed more SDRs as one potential remedy. What's holding them back, CEPR said, was a large debt burden: Almost 80 low-to-middle-income countries face debt distress, and three-fourths of these are especially vulnerable to climate impacts. This creates a "vicious cycle" in which countries struggle to both service debt and respond to extreme weather events, leaving them unable to either get out of debt or recover from disasters and invest in the future.
"Most of the world is going through what many have termed a 'polycrisis,' facing down high levels of external debt, combined with interlocking crises of food insecurity, fluctuating energy prices, impacts of war, and of course, the climate crisis," report coauthor Ivana Vasic Lalovic said in a statement. "Countries are limited in what they can do to respond to the climate crisis, though, when they are forced to divert so much of their resources toward servicing their debts."
The report, titled The Growing Debt Burdens of Global South Countries: Standing in the Way of Climate and Development Goals, called on major financial institutions to address the situation by updating debt resolution frameworks, providing debt relief, financing through grants instead of loans, and allocating more SDRs.
"The international finance community needs to accept that the current dynamic, which prioritizes debt service–no matter how burdensome–over human needs and the urgency of climate crisis preparedness and response is unsustainable," coauthor Lara Merling said in a statement. "They need to step forward with solutions. Millions of lives may depend on it."
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Democrats to Yellen: Unleash Billions in Life-Saving IMF Aid to Developing World
Sen. Elizabeth Warren said a push for $650 billion in Special Drawing Rights would "provide much-needed relief at no cost to the federal government."
Oct 06, 2023
Nearly 60 congressional lawmakers in the U.S. signed a letter this week calling on the Biden administration to help developing countries recover from debt, food insecurity, and the climate crisis by backing the International Monetary Fund in issuing a new allocation of a financial tool known as Special Drawing Rights.
Special Drawing Rights (SDRs) are an international reserve asset that the IMF created and can allocate to member countries. It isn't a currency itself, but rather allows recipients to lay claim to the use of the currencies of member countries, thereby increasing cash flow.
"As developing countries around the world continue to feel the combined effects of simultaneous crises, it is powerfully important that the Biden administration support a new allocation of IMF SDRs to provide much-needed relief at no cost to the federal government," Sen. Elizabeth Warren (D-Mass.) said in a statement on Thursday.
Warren led the letter along with Reps. Jesús "Chuy" García (D-Ill.), Donald Norcross (D-N.J.), Joyce Beatty (D-Ohio), and Pramila Jayapal (D-Wash.). In the letter, sent on Wednesday to President Joe Biden and Treasury Secretary Janet Yellen, the lawmakers pointed to the success of the last major allocation of SDRs—$650 billion worth in 2021 to help countries respond to and recover from the Covid-19 pandemic.
"This measure was by far the single most important action taken to support the economies of developing countries in the face of combined global health, debt, economic, and climate crises," the legislators wrote.
The aid represented by the SDRs was more than wealthy countries typically send to poorer ones during a year and did not add to the recipients' debt. Developing countries used the SDRs to, among other things, stabilize their own currencies; pay down debts to the IMF; and buy essentials like food, vaccines, and personal protective equipment. The allocation likely saved the lives of hundreds of thousands of people, the Bank for International Settlements found.
"SDRs are a readily available and effective tool in your economic policy toolbox—we urge you to use it."
The lawmakers who signed this week's letter are calling for another allocation as developing countries continue to contend with climate disasters, war, and the threat of new pandemics. The request comes as the IMF recently issued its worst five-year economic forecast in 30 years. The 59 signatories asked for at least another $650 billion—a strategic number because that is the most the IMF can sign off on without a vote from Congress, according to Axios.
"Leading your administration now to support a new issuance of at least $650 billion in SDRs is a simple, cost-free, and effective way of saving many export-related jobs—including manufacturing and union jobs—in the U.S., while saving many lives in developing countries and mitigating the effects of a global slowdown," the lawmakers said. "SDRs are a readily available and effective tool in your economic policy toolbox—we urge you to use it."
The legislators emphasized that the SDR allocation would benefit the U.S. because it would increase the market for national exports. The global downturn triggered by the emergence of Covid-19 between January 2020 and May 2021 cost the U.S. around 2.2. million export-related jobs, they noted.
"A new SDR issuance would create more than $200 billion worth of international reserves for developing countries not including China, helping to stabilize global economies and U.S. export markets and therefore preserve and create U.S. jobs that would otherwise be lost to a global recession," the letter states.
The lawmakers are adding their voices to a global call for more SDRs. The idea gained support at the Summit for a New Global Financing Pact in Paris in June, as Axios reported at the time. Globally, the Africa Union, a coalition of Caribbean nations, and Colombian President Gustavo Petro have all stated their support. Several labor, nonprofit, and religious groups also endorsed Wednesday's letter, including the AFL-CIO, the Center for Economic and Policy Research, and the NETWORK Lobby for Catholic Social Justice.
"The labor movement strongly supports the call for a new allocation of SDRs which represent a transformative measure needed to avoid future shocks and job loss related to climate; health; debt; and digitalization; among other challenges," AFL-CIO international director Catherine Feingold said in a statement.
The ball is now in Yellen's court, Axios observed, as she is the one who would tell the U.S. to vote to issue more SDRs at the IMF, and such a vote would likely be decisive. However, in October of 2022 she said that she did not think issuing more SDRs was appropriate because wealthy nations still had existing reserves they needed to channel to developing nations, as Reuters reported at the time. Since then, she has made no other statements on the matter, according to Axios.
"The world wants the IMF to do this again," Mark Weisbrot of the Center for Economic and Policy Research told Axios in June. "It's only the U.S. Treasury Department that is holding it up."
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IMF Austerity Measures Are ‘Undermining Rights’ Around the World: Report
Human Rights Watch looked at 39 loans in 38 countries since the start of the pandemic, and found that 30 of them contained at least one term that threatened human rights.
Sep 26, 2023
The International Monetary Fund continues to impose austerity measures that threaten human rights.
That's the conclusion of a Human Rights Watch (HRW) report published Monday that looks at 39 loans approved in 38 countries between the beginning of the Covid-19 lockdowns in March 2020 and March 2023. While, at the start of the pandemic, IMF managing director Kristalina Georgieva spoke of investing in a recovery that was "greener, smarter, and fairer," the majority of the loans reviewed by HRW still included requirements like lower government spending or higher regressive taxes.
"Despite its promises at the beginning of the pandemic to learn from past mistakes, the IMF is pushing policies that have a long track record of exacerbating poverty and inequality and undermining rights," HRW senior researcher and advocate on economic justice and rights Sarah Saadoun said in a statement.
The loans considered in the HRW report impacted countries home to 1.1 billion people, and 30 of them had at least one requirement that put their rights at risk. Twenty-two of them included limits on public wage bills, 23 included regressive value-added taxes, and 20 decreased or eliminated subsidies for fuel or electricity.
While HRW acknowledged that eliminating fossil fuel subsidies is a necessary part of the transition to renewable energy, this needs to be done in a way that takes the needs of the poorest into account. For example, Saadoun told Euronews of a woman who works seven days a week as a domestic worker in Sri Lanka.
"The impact of the economic crisis there meant her earnings were essentially cut in half. On top of that, in an effort to reduce public spending, the government cut subsidies for electricity," she said. "She and her son had to move in with her mother, meaning that she is completely dependent on her relatives and her employer to survive."
"I can either get medicine (insulin) for my diabetes or pay for my daughter to go to school or keep the lights on at my house."
HRW argues that both the IMF and the governments they loan to have an obligation to address economic crises in ways that further, rather than retrench on, human rights. At the same time, the IMF's austerity measures fail at its own goal of reducing debt. Its April 2023 World Economic Outlook concluded that they "do not reduce debt ratios, on average."
The report looked at the case of Jordan, which has received IMF loans since 2012, yet has a higher debt-to-gross-domestic-product ratio than at the beginning.
Jordan is also an example of how one measure the IMF has introduced to offset the harm of austerity is insufficient. The IMF has taken to relying on social spending floors or means-tested relief programs. Jordan, for example, instituted a cash-transfer program called Takaful in 2019. While poverty in Jordan increased from 15 to 24% between 2018 and 2022, the program only aided approximately 5% of total Jordanians in 2022, or around 20% of those struggling with poverty.
"While the spending floor and Takaful were an improvement over the earlier programs, they are a bandage on a bullet wound," the report authors wrote. "The reforms generated billions in savings and new revenues through measures that increased the cost of living, yet public spending on health, education, and social assistance did not increase as a percentage of the budget."
HRW had several recommendations for what the IMF could do to reform its programs to bolster human rights. They include conducting human rights assessments of the impacts of these programs, setting different social spending floors for essential services such as health and education, and replacing means-tested programs with universal protections.
If these changes are not adopted, Pakistan offers a warning example. There, a July 2022 agreement between the IMF and the government stipulated higher taxes, a market-based exchange rate, and an end to subsidies for energy and fuel, as HRW pointed out.
"I can either get medicine (insulin) for my diabetes or pay for my daughter to go to school or keep the lights on at my house," a 47-year-old Lahore rickshaw driver told HRW. "I can do only one of the three. The IMF should come and see how I am managing my life."
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The Rise and Fall of Greece’s Radical-in-Name-Only Syriza Party
Lack of experience in governance, ideological confusion, severe structural constraints, crude political opportunism, and broken promises guaranteed that Syriza’s downfall was just a matter of time.
May 25, 2023
On January 25, 2015, Greece’s left-wing party Syriza (Coalition of the Radical Left), which subscribed to no particular ideology but ran an election campaign that vowed to end the sadistic austerity measures that had been imposed on Greece by its international creditors, shred the bailout agreements into pieces, write off a big chuck of the debt, and create jobs for hundreds of thousands of unemployed, won the legislative elections by taking 36% of the popular vote. The result of the election sent shock waves through Europe’s political establishment and marked the return of hope for Greece and left-wing parties and movements around the world.
It was indeed a historic victory for the Left, especially considering the fact that, ten years earlier, Syriza was struggling to gain just a few seats in the Greek parliament. The Communist Party of Greece was far more popular than the Coalition of the Radical Left, whose ranks included an array of leftists ranging from Trotskyists, Maoists, and neo-Marxists to greens and feminists. Indeed, while the Communist party had solid links with working-class people and exerted decisive influence on trade union activism, Syriza’s “impact on civil society was confined to the ideological attraction that it had for a small segment of the academia."
On May 21, 2023, elections were held in Greece and the conservative New Democracy party of Prime Minister Kyriakos Mitsotakis scored a landslide victory, trouncing Syriza by 20 percentage points. However, the new electoral system of proportional representation that had been introduced under the former prime minister and Syriza leader Alexis Tsipras prevents New Democracy’s 40% vote to win an outright majority of the 300 seats in parliament. Mitsotakis had revealed all along that he is not interested in sharing power, so a second election is going to take place in late June where the winning party needs to achieve just 37% of the popular vote.
It was abundantly clear to any unbiased observer that Syriza’s inner circle consisted of people who were dedicated to the pursuit and maintenance of power rather than bringing about radical change.
The scale of Syriza’s defeat in the parliamentary elections of May 21 (lost all but one of the 59 electoral regions in Greece) may signify the end of the road for the party of Alexis Tsipras. The party’s demise has in fact been underway from the very first weeks that Tsipras took office as Greece’s prime minister. Lack of experience in governance, ideological confusion, severe structural constraints, but also crude political opportunism and broken promises pretty much guaranteed that Syriza’s downfall was just a matter of time.
First, the radical-in-name-only Syriza party formed a government with the right-wing and xenophobic party Independent Greeks. There were deep disparities of all sorts between the two parties, but obviously this did not matter to Tsipras since he saw forging an alliance with right-wingers as a necessary tactical move to secure power. And power was all that ever mattered to Syriza’s leader and his inner circle. During the 2023 election campaign, Tsipras would leave many leftist voters flabbergasted by courting voters from the neo-Nazi party Golden Dawn.
Second, Tsipras signed an agreement to extend the austerity measures imposed on Greece by the euro masters, only a few weeks after coming to power.
Third, Syriza’s leader gambled on Greece’s future with a sham referendum in order to save his government from collapse and then went on to betray an entire nation that voted overwhelmingly against the continuation of austerity by signing a new bailout agreement that continued Greece’s status as Germany’s “de facto colony.”
Tsipras called the new bailout agreement “a necessary choice,” though he had engaged in ferocious attacks against his predecessors for having signed similar bailout agreements with the international creditors.
More than 40 Syriza MP’s spoke against the new measures, and half of Syriza’s central committee sided against the new agreement. But none of this mattered. Syriza had very weak democratic structures, no real links with the Greek working-class, and Tsipras had total authority over party decisions as most policy issues were decided in unofficial meetings with people close to the “great leader.” Moreover, Syriza as a party had lost its autonomy once it gained power and “was subsumed into the state.”
Indeed, it was abundantly clear to any unbiased observer that Syriza’s inner circle consisted of people who were dedicated to the pursuit and maintenance of power rather than bringing about radical change. Subsequently, following his government’s capitulation to the euro masters, Tsipras took steps to rebrand the party as a “progressive” political force and begun to tap into the legacy of the Pasok party, one of Greece’s center-left political parties, and to emulate more and more the political persona and political tactics of its charismatic founder and former Prime Minister Andreas Papandreou, who, incidentally, also appeared on the Greek political scene as a radical who made exorbitant promises to the people, such as socializing the economy, modernizing the countryside, terminating membership in NATO, and shutting down U.S. military bases in Greece.
Since the end of the Second World War, sadly enough, the Greek left has been betrayed by its own leaders on multiple occasions. The end result of Syriza’s abandonment of radicalism was defection on the part of hundreds of thousands of mostly working-class voters, though its metamorphosis into a mainstream political party attracted many center-left voters to its ranks.
In the 2019 legislative elections, Syriza still managed to gather 31.5% of the popular vote, losing just less than four points since its last victory in 2015, but the conservative New Democracy party not only won and secured a comfortable majority of 158 out of 300 seats, but had a remarkable 11-point increase from 2015.
Moreover, unlike Tsipras’ “leftist” government, Mitsotakis' conservative government kept many of its campaign promises and handled some foreign policy crises rather effectively. For example, Mitsotakis kept his promise to cut taxes, including a 22% cut to an unpopular property tax introduced during the first bailout agreement, suspended the value added tax on new construction, and reduced the insurance costs of employees and businesses.
Big capital and the middles classes have been the main beneficiaries of Mitsotakis’ efforts to rejuvenate the Greek economy. Because of the pandemic, Greece’s gross domestic product (GDP) contracted by 9% in 2020, but grew by 8.43% in 2021 and by 5.91% in 2022. Tourism contributed greatly to the strong rebound in GDP, and the economic prosperity of Greece remains strongly tied to the development of tourism.
However, Greece’s current accounts deficit increased substantially in 2022, mainly due to the worsening of the balance of goods. And the government debt-to-GDP ratio stood at 171.3% at the end of 2022, which is really at unsustainable levels, though the mainstream press in Greece would not devote space to presenting gloomy economic data ahead of the elections.
But it’s doubtful that doing so would have made any difference. The truth of the matter is that there is an impression among many Greek voters that the Mitsotakis’ government has stabilized the economy, protects the national interest more than adequately, and that it would be suicidal to have Syriza back in power after all its broken promises and flimsy statements made about the economy by key party members during an election campaign, which included a proposal for “local complementary currencies” by the party’s former minister of finance and which came only a few days after Yanis Varoufakis (rightly or wrongly, one of the most unpopular political figures in all of Greece) had called for the adoption of a parallel currency “Dimitra.” Syriza’s shaky position on key issues of national security was also a major drawback for many voters.
Indeed, it seems that what lies at the heart of the 2023 Greek legislative election results is that many voters were distrustful of Tsipras and his politics. This is most likely why so many voters appeared unfazed by revelations of a major surveillance scandal that engulfed the conservative prime minister himself. Mitsotakis’ New Democracy government is made up of right-wing conservatives and even includes in its ranks a couple of high-ranking officials with a history of involvement in far-right politics, but it seems that voters were more concerned with Syriza’s own deficiencies rather than those of the ruling conservative party.
Voters also delivered “a crushing defeat” to Yanis Varoufakis’ MeRA25 party as it failed to cross the 3% threshold to re-enter parliament.
Among left-wing parties, only the Greek Communist party performed better, gathering 7.23% of the popular vote over 5.3% in 2019.
In sum, the future of the left in Greece looks anything but promising at present. With the revival of Pasok, which had been in steep decline electorally since 2012 but managed to get 11.46% of the popular vote in the 2023 legislative elections, Syriza’s long demise may be complete a few years from now. And it will be very difficult for the current Communist party to climb into double digits even if Syriza returns to the dark days of securing low-to-mid single digit votes.
But the Greek left has suffered many crippling blows in the past and always finds a way to resurrect itself, to rise like a phoenix from the ashes. Because as long as exploitation, injustice, and extreme inequality remain central aspects of human society, there will always be a need to create a radical vision for the future.
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How to End Global Financial Apartheid
The poorer countries are demanding an end to a world dominated by the rich—as well they should.
May 09, 2023
The key to economic development and ending poverty is investment. Nations achieve prosperity by investing in four priorities. Most important is investing in people, through quality education and health care. The next is infrastructure, such as electricity, safe water, digital networks, and public transport. The third is natural capital, protecting nature. The fourth is business investment. The key is finance: mobilizing the funds to invest at the scale and speed required.
In principle, the world should operate as an interconnected system. The rich countries, with high levels of education, healthcare, infrastructure, and business capital, should supply ample finance to the poor countries, which must urgently build up their human, infrastructure, natural, and business capital. Money should flow from rich to poor countries. As the emerging market countries became richer, profits and interest would flow back to rich countries as returns on their investments.
That’s a win-win proposition. Both rich and poor countries benefit. Poor countries become richer; rich countries earn higher returns than they would if they invested only in their own economies.
Strangely, international finance doesn’t work that way. Rich countries invest mainly in rich economies. Poorer countries get only a trickle of funds, not enough to lift out of poverty. The poorest half of the world (low-income and lower-middle-income countries) currently produces around $10 trillion a year, while the richest half of the world (high-income and upper-middle-income countries) produces around $90 trillion. Financing from the richer half to the poorer half should be perhaps $2-3 trillion year. In fact, it’s a small fraction of that.
The problem is that investing in poorer countries seems too risky. This is true if we look at the short run. Suppose that the government of a low-income country wants to borrow to fund public education. The economic returns to education are very high, but need 20-30 years to realize, as today’s children progress through 12-16 years of schooling and only then enter the labor market. Yet loans are often for only 5 years, and are denominated in US dollars rather than the national currency.
Suppose the country borrows $2 billion today, due in five years. That’s okay if in 5 years, the government can refinance the $2 billion with yet another five-year loan. With five refinance loans, each for five years, debt repayments are delayed for 30 years, by which time the economy will have grown sufficiently to repay the debt without another loan.
Yet, at some point along the way, the country will likely find it difficult to refinance the debt. Perhaps a pandemic, or Wall Street banking crisis, or election uncertainty will scare investors. When the country tries to refinance the $2 billion, it finds itself shut out from the financial market. Without enough dollars at hand, and no new loan, it defaults, and lands in the IMF emergency room.
Like most emergency rooms, what ensues is not pleasant to behold. The government slashes public spending, incurs social unrest, and faces prolonged negotiations with foreign creditors. In short, the country is plunged into a deep financial, economic, and social crisis.
Knowing this in advance, credit-rating agencies like Moody’s and S&P Global give the countries a low credit score, below “investment grade.” As a result, poorer countries are unable to borrow long term. Governments need to invest for the long term, but short-term loans push governments to short-term thinking and investing.
Poor countries also pay very high interest rates. While the US government pays less than 4 percent per year on 30-year borrowing, the government of a poor country often pays more than 10 percent on 5-year loans.
The IMF, for its part, advises the governments of poorer countries not to borrow very much. In effect, the IMF tells the government: better to forgo education (or electricity, or safe water, or paved roads) to avoid a future debt crisis. That’s tragic advice! It results in a poverty trap, rather than an escape from poverty.
The situation has become intolerable. The poorer half of the world is being told by the richer half: decarbonize your energy system; guarantee universal healthcare, education, and access to digital services; protect your rainforests; ensure safe water and sanitation; and more. And yet they are somehow to do all of this with a trickle of 5-year loans at 10 percent interest!
The problem isn’t with the global goals. These are within reach, but only if the investment flows are high enough. The problem is the lack of global solidarity. Poorer nations need 30-year loans at 4 percent, not 5-year loans at more than 10 percent, and they need much more financing.
Put more simply, the poorer countries are demanding an end to global financial apartheid.
There are two key ways to accomplish this. The first way is to expand roughly fivefold the financing by the World Bank and the regional development banks (such as the African Development Bank). Those banks can borrow at 30 years and around 4 percent, and on-lend to poorer countries on those favorable terms. Yet their operations are too small. For the banks to scale-up, the G20 countries (including the US, China, and EU) need to put a lot more capital into those multilateral banks.
The second way is to fix the credit-rating system, the IMF’s debt advice, and the financial management systems of the borrowing countries. The system needs to be reoriented towards long-term sustainable development. If poorer countries are enabled to borrow for 30 years, rather than 5 years, they won’t face financial crises in the meantime. With the right kind of long-term borrowing strategy, backed up by more accurate credit ratings and better IMF advice, the poorer countries will access much higher flows on much more favorable terms.
The major countries will have four meetings on global finance this year: in Paris in June, Delhi in September, the UN in September, and Dubai in November. If the big countries work together, they can solve this. That’s their real job, rather than fighting endless, destructive, and disastrous wars.
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Oxfam Report Highlights Deep Harms of IMF 'Austerity Drive' in Poor Nations
"For every $1 the IMF encouraged a set of poor countries to spend on public goods, it has told them to cut four times more through austerity measures," the humanitarian group estimated.
Apr 13, 2023
The International Monetary Fund insists that so-called "social spending floors" enacted as part of its loan programs for poor and middle-income countries help protect critical social services from the kinds of austerity that the powerful institution has historically imposed on borrowers.
But an Oxfam International analysis released Thursday in the midst of the IMF and World Bank's spring meetings found that the fund's spending floors—part of a strategy implemented in 2019—"are proving largely powerless against its own austerity policies that instead force countries to cut public funding."
The humanitarian group estimated that "for every $1 the IMF encouraged a set of poor countries to spend on public goods, it has told them to cut four times more through austerity measures."
"The IMF's 'social spending floors' encouraged raising inflation-adjusted social spending by about $1 billion over the second year of its loan programs compared to the first year, across the 13 countries that participated where data is available," Oxfam estimated. "By comparison, the IMF's austerity drive has required most of those same governments to rip away over $5 billion worth of state spending over the same period."
Oxfam's report comes as poor countries are facing what the United Nations described Tuesday as a "lost decade" due in large part to soaring debt levels and interest rate hikes implemented by the U.S. Federal Reserve and other central banks.
The U.K.-based advocacy group Debt Justice released figures earlier this week showing that in 2023, lower-income country debt payments will reach their highest level in 25 years, endangering spending on healthcare, education, climate action, and more.
For its new report—titled IMF Social Spending Floors: A Fig Leaf for Austerity?—Oxfam analyzed data from 17 low- and middle-income countries that agreed to long-term loan programs with the IMF in 2020 and 2021, years in which the coronavirus wreaked havoc across the globe.
The group found that the IMF's social spending floors were ineffective at achieving their stated goal of preserving minimum levels of social investment.
"Based on the available data, not one of the 17 countries currently has a social spending floor large enough to cover the cost of meeting the World Health Organization's target to reach the Sustainable Development Goal for Health, let alone targets in other areas like education," Oxfam found. "The floors agreed by the IMF with Chad, Cameroon, Jordan, and Madagascar meant that their social spending targets set in the IMF program had actually decreased by 3-5% over the course of their loans."
Amitabh Behar, Oxfam International's incoming interim executive director, said that "to make matters worse, these social floors have become more like ceilings."
"While only half of the 17 countries we analyzed had actually met their minimum social spending floors—which is disappointing enough—just two had spent 10% more than what they agreed with the IMF," Behar added.
The new report was published months after a separate Oxfam analysis found that 13 out of the 15 IMF loan programs negotiated during year two of the Covid-19 pandemic required "new austerity measures such as taxes on food and fuel or spending cuts that could put vital public services at risk," including healthcare.
Half of low- and lower-middle-income countries cut health spending as a share of their budgets during the first two years of the coronavirus crisis, Oxfam and Development Finance International estimated last year.
In its Thursday report, Oxfam suggested a number of improvements the IMF could make to its loan programs to shield poor nations' key public services from cuts.
"The IMF should set social spending levels to at least meet the spending goals and social outcomes set in countries' development strategies," the group recommended. "These should be social spending goals supported by macroeconomic frameworks that enable rapid progress towards the Sustainable Development Goals."
Oxfam also argued that "social spending floors should be increased through progressive revenue-raising measures, especially different forms of wealth taxation, rather than reallocating resources or budget cuts."
"While the 'social spending floors' initiative retains its original urgency and promise," Behar said in a statement Thursday, "it is being undermined by the worst effects of austerity that the IMF is pursuing much more enthusiastically."
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'Time for a Fresh Start': Bike Protest Urges World Bank to Stop Funding Fossil Fuels
"After years of David Malpass in the president's office, we cannot afford another second of climate denial leading the bank," said one campaigner.
Apr 11, 2023
Roughly 100 activists marked the opening day of the World Bank Group spring meetings by riding bicycles through the streets of Washington, D.C. on Monday night, calling on incoming bank president Ajay Banga to halt fossil fuel financing and ramp up clean energy and climate justice investments.
While demanding a turnaround on green funding in developing countries, the "Wrong Way on Climate" bike protest blocked rush-hour traffic outside World Bank headquarters as finance ministers traveled to dinner parties and backroom meetings.
"Bikes are very literally people-powered," Hope Neyer, a public health student and organizer with Shutdown D.C., said in a statement. "They're the ultimate zero-emission vehicles. We chose to gather on bikes tonight to remind the World Bank of the potential we have as individuals and communities to show up for what we believe in—the need to protect our planet, the international right to make healthy choices for our families, and a future that is just and livable for us all."
The action took place on the first day of the bank's 2023 spring meetings, which are being run this week by outgoing World Bank President David Malpass. Climate advocates cheered in February when Malpass, tapped to lead the bank by then-U.S. President Donald Trump in 2019, said that he plans to step down by the end of June, nearly a year ahead of schedule. The early resignation announcement followed a sustained pressure campaign against Malpass, who was condemned as a "climate denier" after refusing to acknowledge that burning fossil fuels causes the planet-heating pollution underlying increasingly frequent and intense extreme weather disasters around the globe.
Activists—whose bike ride started under a banner that reads, "World Bank: Time for a Fresh Start on Climate"—are now looking to Malpass' replacement, Banga, to reverse course and scale up decarbonization efforts. Progressives in February denounced U.S. President Joe Biden for nominating the private equity executive and former Mastercard CEO to the role, arguing that he's likely to advance the powerful international financial institution's historically pro-corporate and pro-fossil fuel agenda. Campaigners are wasting no time in pressuring Banga to make the World Bank an instrument for genuinely sustainable development.
"Nominee Banga has the opportunity of a lifetime, if he can rise to the climate challenge."
"After years of David Malpass in the president's office, we cannot afford another second of climate denial leading the bank," Andrew Nazdin, director of the Glasgow Actions Team, said Monday. "Nominee Banga has the opportunity of a lifetime, if he can rise to the climate challenge—ending financing oil or gas, ramping up investment in renewables, and becoming the transformative leader the world is begging for."
In an attempt to defend his record amid criticism last September, Malpass said the World Bank allocated $31.7 billion to climate finance in 2021, with half of it aimed at bolstering adaptation efforts. Not only is that a tiny fraction of the trillions of dollars in green investment the Intergovernmental Panel on Climate Change (IPCC) says is needed each year to maintain a habitable planet, but according to reporting by the Financial Times, Malpass was directly involved in weakening multilateral development banks' (MDBs) joint announcement on climate lending at COP26.
After the World Bank described itself last year as "the largest multilateral funder of climate investments in developing countries," Bronwen Tucker of Oil Change International pointed out that "the World Bank Group still funds more fossil fuels than any other MDB, and they continue to lock Global South countries into expensive and volatile fossil fuel contracts through their heavy-handed policy lending programs."
The Big Shift Global coalition showed in a recent report that the World Bank has directly financed at least $14.8 billion in fossil fuel production since the signing of the Paris agreement in 2015—negating its 2017 pledge to stop supporting oil and gas projects within two years.
The IPCC and the International Energy Agency have made clear that fossil fuel expansion is incompatible with limiting global warming to 1.5°C above preindustrial levels, beyond which the climate emergency's consequences will grow even deadlier, especially for humanity's poorest members who have done the least to cause the crisis.
"As the World Bank and IMF meet behind closed doors to advance the agenda of concentrated corporate and political power, a coalition of D.C.-area activists in solidarity with movements worldwide, especially in the Global South, manifested a very different vision outside," Basav Sen, member of the For People For Planet coalition, said Monday. "We encircled the meetings on bicycle and on foot, to assert the power of organized people."
Concerned citizens from around the globe are demonstrating throughout the week to demand that the World Bank stop financing fossil fuels. They also plan to call for an overhaul of both Bretton Woods institutions—the World Bank and the International Monetary Fund—to "prioritize justice, helping developing countries to green to follow a 1.5°C roadmap with poverty alleviation at its heart," according to the Glasgow Actions Team. "They will also call to end the 'gentlemen's agreement' that has thus far allowed only the U.S. to nominate the World Bank president."
On Tuesday morning, activists held a "First 100 Days" protest outside World Bank headquarters. They unveiled a first 100 days checklist that outlines what they want incoming bank president Banga to achieve at the start of his five-year term.
Campaigners also plan to gather outside the World Bank on Wednesday for a "Stop Fossil Gas" demonstration, where they will draw attention to the bank's continued funding of a worldwide expansion of gas pipelines.
Activists plan to cap off the week of action with a large march and rally on Friday that features a "Trojan Horse" of debt impacts on low-income nations the World Bank works with.
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