IMF must support public investment and stop public sector wage bill constraints

published 13 October 2020 updated 16 July 2024

Today, in a joint webinar with Action Aid and Public Services International, Education International called on the International Monetary Fund (IMF) to stop advising countries to cut or freeze public wage bills.

IMF loans with “commitments” for governments to implement new or renewed austerity programmes

In the context of the COVID-19 pandemic, though the IMF was fast to respond to countries’ urgent needs by providing short-term emergency loans, new research shows that the loans distributed from April to July this year, contain “commitments” for governments to implement new or renewed austerity programmes as soon as the immediate health crisis has peaked, with little provision for any recovery period.

So-called “efficiency” measures impede government’s ability to guarantee the right to education

Public wage bill constraints are a key element of austerity policies and have had disastrous impacts in the education sector. In the webinar, Haldis Holst, Education International’s deputy general secretary, pointed out the multiple ways that wage bill constraints affect both education workers and students on the ground. She explained that, in the education sector, public wage bill constraints lead to teacher shortages, salary cuts, de-professionalisation, and ultimately, deterioration in education quality. This affects the most vulnerable students the most and can lead to increased privatisation of education. “It’s not just about budgets, it’s about people”, she argued, highlighting that these so-called “efficiency” measures impede government’s ability to guarantee children’s right to education.

Education International believes that the only way to exit the education crisis that has emerged due to COVID-19 and to get back on track to achieve Sustainable Development Goal (SDG) 4 by 2030 is to increase expenditure on education. Not only is urgent investment in education crucial to give every child the education they deserve but it is also important to invest in education to drive further economic and social recovery. Holst argued that “when it comes to education, we cannot cut costs. Rather, we must invest in education now for long term gains.”

IMF puts countries in a “straight-jacket”

Leo Baunach, director of the Washington Office of the International Trade Union Confederation and Global Unions, explained how, though the IMF no longer technically “requires” governments to cut wage bills, it nonetheless puts countries in a “straight-jacket” by putting pressure on them to suppress spending as part of broader economic adjustments.

Public Services International’s general secretary, Rosa Pavanelli, also highlighted that, ultimately, “this is a systemic crisis,” and Holst, in her closing remarks crucially reminded participants that “economics is political”, and that when it comes to prescriptions for growth, one size does not fit all. Countries must determine their own paths to recovery, putting people at the centre of any plans.

Union statements for increased investment to achieve the SDGs and against austerity measures

As the IMF and World Bank Annual meetings will take place this weekend, Education International has joined Global Unions in making a statement calling for the international finance institutions to support public investments. The statement argues that the Annual Meetings should be a turning point, through an overarching plan to fully finance the SDGs. Importantly, it also calls for ending the promotion of public wage bill cuts that threaten the provision of quality education and for the International Finance Corporation, a member of the World Bank Group, to make permanent the freeze on investments in for-profit primary and secondary schools.

Education International has also joined with trade unions and civil society organisations from multiple sectors in a statement to demand that the IMF stops promoting austerity around the world.