This week, the International Monetary Fund (IMF), one of the world’s largest financing institutions and a key player in the global economy, are holding their Spring Meetings in Washington DC. Despite never having an African Executive Director and Africa having less than 7% of voting power, the IMF wields significant influence over African governments and its reform is an essential part of achieving Justice for Africa.
You can be a part of pushing for systemic change at the heart of the international financial system. Read on to find out how!
CURRENT CONTEXT OF GROWING INJUSTICE AGAINST AFRICA
Firstly, global injustice against Africa is rising, with over $4 trillion worth of international injustices in the last five years alone, and the impact on the rights of African children and young people has been devastating. More children are out of school in Africa and more have been forced into child labour since the world committed to leave no one behind in the Sustainable Development Goals.
One of the key drivers of this is the growing inequality in the size of government budgets in Africa and those in Europe and the US. World wealth has increased by $14.5 trillion since the SDGs started in 2016 yet GDP per capita has actually declined in sub-Saharan Africa. If we go back further the reality is even more alarming, with GDP per capita increasing more in an average year in high income countries than it has in sub-Saharan Africa in the last 62 years.
This is in spite of a huge increase in the use of African resources in the global economy, $80 billion more since the start of the SDGs alone. A huge reason for this is that the profits from these resources are moved offshore and too many African governments are left without enough money to deliver the basic rights of their citizens, such as education, healthcare and social protection.
The incredibly low revenue African governments have to spend is the main reason why so many African children have no school to go to. For example, total government education spending in 30 African countries, with over 600 million school aged children between, them is less than the government education spending in the single country of the Netherlands, which has under 3 million school aged children. The average child in Europe has more spent on their education every few weeks than the average African child has in their lifetime. Yet the average African country spends a higher percentage of their government budget on education than the most generous European country.
To improve education budgets we have to address why government budgets are so low despite Africa’s abundant resources. Why do African governments face so many international injustices including on tax, aid and debt? For example:
Ghana is now forced spends a higher percentage of its government expenditure on just the interest of its debt to other countries than it does on education.
Corporate tax evasion in Africa costs over $4.5 billion every year and offshore financial wealth $2.3 billion a year.
Rich countries failure to meet the UN 0.7% aid target and their decisions to allocate their aid based on foreign policy rather than where the aid is needed costs Africa Sub-Saharan Africa over $120 billion every year
WHAT’S THE IMF GOT TO DO WITH THIS?
The IMF plays a huge role in facilitating the global debt crisis, with 47 out of 54 African countries currently in debt to the IMF. The IMF is often the last resort for countries seeking financial help during a time of crisis, yet the terms and conditions of these loans are often deeply unjust, strangling African economies and leaving them without enough money to deliver the right to education for all their children and young people.
If the IMF had the best interests of African countries at heart - it would cancel debt when it is unsustainable, ensure creditors are accountable for bad loans, and focus on proper advice to countries on how to ensure multinational companies pay their tax. Instead, their priorities are to bail out the international creditors, spread the unsustainable debt burden over more decades and cut the already incredibly low government budgets in Africa to pay for it.
For example, in exchange for financial help, the IMF often imposes “conditions” that force governments to implement deeply unfair policies. These include cutting public spending (i.e. austerity) including for essential services such as education and the privatisation of key industries and natural resources, opening the door for multinational companies without ensuring the profits from these return to the country.
This “conditionality” has been widely criticised by civil society, academics and economists for years and whilst some steps have been made in the right direction, the IMF continues to insist on “fiscal consolidation”, which relies heavily on cuts to public funding, including to education.
The IMF says that their policy called ‘Social Spending Floors’ protect minimum levels of social spending in countries that borrow money from them, but recent research by Oxfam exposed how these were largely powerless against the austerity policies also enforced by the IMF: “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”. Human Rights Watch aptly likens Social Spending Floors to putting “a bandage on a bullet wound”.
It’s not just the conditions attached to these loans, but also the terms of their repayment that are fundamentally unjust. Recent research by the UN Conference on Trade and Development found that the interest rates African countries pay on loans are four times higher than the United States and eight times higher than Germany, and that many African governments are now forced to spend more on just the interest payments of their debt than they do on education or health.
On top of this, the IMF’s ‘Surcharge Policy’ - which are essentially punishment fees for countries with high levels of outstanding IMF debt - led nine UN Independent Experts and Special Rapporteurs to write to the IMF with concern that this policy was violating international human rights law. As Nobel Prize winning economist Joseph E. Stiglitz highlights "the IMF should not be in the business of making a profit off of countries in dire straits”, which is especially true since falling behind on debt repayments often occurs during times of crisis out of a single countries control: for example, number of country’s subject to surcharges rose from 8 in 2019 prior to the COVID-19 pandemic, to 22 countries by 2024.
Another clear example of the injustices against Africa at the hands of the IMF occurred during the COVID 19 crisis. Faced with a global liquidity crisis, the richest countries undertook quantitative easing - which basically means printing more money. But only the largest countries could do this, so it was proposed for an emergency one off issue of IMF Special Drawing Rights of $650 billion. IMF Managing Director, Kristalina Georgieva, boasted that this SDR allocation “will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis”
However, when the funds were actually allocated, the rich countries in control of the IMF decided to give most of the SDR allocations to themselves, giving the equivalent of $340 per person in the US, $365 in the European Union and $19 per person to Sub-Saharan African countries. There have been some reallocations since then, thanks to the efforts of France in particular. However, while these are welcome, even with this reallocation the average African person will still receive the equivalent of $200 less than the average European person. How can this be right?
HOW ARE THESE UNJUST POLICIES AND DECISIONS MADE?
These unfair decisions and policies do not appear in a vacuum, but are a direct result of which countries, and therefore which economic ideology, hold the most power in the IMF. Considering the damage IMF policies have had on Africa, it comes as no surprise that voting power within the IMF has remained virtually unchanged since its founding in 1944, when many African countries were still under colonial rule.
With the largest share of votes, the United States effectively has veto power over all major IMF decisions, and together with the other G7 and European Union countries holds well over half of the total voting power. That the UK and Belgium alone still hold more votes than all of sub-Saharan Africa combined is an outdated, discriminatory and undemocratic governance system unfit for a global financing institution in 2024.
Countries in Africa make up over half of active IMF Lending Commitments and are home to almost 20% of the world’s population, yet the entire continent holds just 6.47% of voting rights.
In practice this means that while African countries are most likely to need assistance from the IMF and are directly impacted by its policies, African governments and citizens have little to no power in the design or conditions of its loans and programmes. This is yet another example of the world's richest countries deciding the rules the poor must live by and has direct consequences on the money available to African governments to deliver the right to education for their children and young people.
HAS THERE BEEN ANY ATTEMPT AT REFORMING IMF GOVERNANCE?
Civil society and political leaders in the Global South have been demanding IMF reform for decades and their concerns have recently been echoed by the UN Secretary-General António Guterres, who called the current global economic system “morally corrupt” and “created by rich countries to benefit rich countries”.
Reforming international financing institutions was even in the Sustainable Development Goals, under target 10.6 which committed to “Ensure enhanced representation and voice of developing countries in decision making in global international economic and financial institutions in order to deliver more effective, credible, accountable and legitimate institutions”
The problem is that due to the unfair voting structure explained above, the rich countries that benefit from the current system have the power to block any calls for change. They claim that the amount of voting power you have should reflect how wealthy your economy is rather than the number of people that you have. However none of these countries run their own government that way. As the economic anthropologist, Dr Jason Hinkel said:
“In any national political system, we would reject the notion that rich people should have more voting power than poor people, and more influence over economic policy decisions. We would see this as corrupt and morally repulsive. And yet such plutocracy is normalised in the World Bank and the IMF.”
Nevertheless, hope for change was high at the end of last year. The IMF’s Annual Meetings were being held in Africa for the first time in 50 years and the outcomes of the organisation's 16th Quota Review were due in December 2023. Quotas, in the IMF's own words, are "the building blocks of the IMF’s financial and governance structure” and serve as the basis of each country's voting power.
However, far from redistributing quotas, and therefore redistributing voting power, to be more democratic, equitable and decolonised, the IMF decided to increase quotas only in proportion to a country’s existing shares. This has made future reform even more difficult, as any redistribution of quotas will now need to be far more ambitious.
While the end of 2023 did see the addition of a new seat for sub-Saharan Africa on the IMF Executive Board, this new position does not affect voting power of the 45 countries under their mandate. In fact, the Executive Board itself is deeply unequal, with some of the richest countries having a sole Executive Director representing their specific interests, such as China, France, Germany, Japan, the USA and UK whereas the 54 African countries put together have just 3.
WHAT NEEDS TO HAPPEN AT THE IMF TO ACHIEVE JUSTICE FOR AFRICA?
Reforming the IMF is just one part of the global system change needed to end the injustice facing Africa in the international system, but it’s a good place to start.
As the Justice for Africa campaign, we join civil society partners across the world in calling on the IMF to enhance Africa’s representation in the institution's decision-making structures and support, not undermine, education financing on the continent by:
Redistributing voting powers within the IMF to be equitable, democratic and decolonised by June 2025 to meet the IMF’s own promises and support towards achieving SDG 10.6
Support education financing by ending the IMF imposition of extreme austerity measures in Sub-Saharan Africa, including encouraging more public spending on education and stronger protection of education spending in social spending floors
Ensuring a fairer reallocation or reissuing of Special Drawing Rights to ensure universal access to education and solve the teacher crisis.
HOW CAN YOU HELP BUILD PRESSURE FOR THE IMF TO ACT?
For activists defending the right to education in their communities and countries, reforming a global institution such as the IMF may not seem the most connected to their work. However, as we’ve tried to demonstrate, it’s a core reason why African governments do not have enough money to spend on funding education in their countries.
Building more visibility and knowledge on the way the IMF discriminates against Africa and undermines education financing on the continent is key to creating enough public pressure to force them to change.
For the past year Justice for Africa has been targeting the Development Committee of the IMF, which is made up of Ministers of Finance or Development from 25 countries and has a mandate to advise the IMF on development issues. We sent an open letter signed by over 70 youth- and student-led organisations from over 30 countries ahead of their Spring Meetings in 2023 and this year we are taking a more public approach, targeting these world leaders on social media.
You can join us by sharing the graphics below or downloading our social media toolkit to help make the demand for change as loud as possible during this week’s meetings in Washington DC.
Our advocacy doesn’t end once these meetings are over, if you want to get more involved join the Justice for Africa campaign today to be the first to hear about our next steps.
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