• Debt and MDGs

Debt and MDGs

This paper intends to demonstrate the International Monetary Fund’s (IMF) role in constraining countries from increasing public expenditure in education to meet the Education For All (EFA) goals and the education-related Millennium Development Goals (MDGs). The findings are based on research and country case studies undertaken by ActionAid International offices in Guatemala, Bangladesh, India, Cameroon, Ethiopia, Kenya, Nigeria and Sierra Leone during 2004-05.

This document argues that the tight macroeconomic policies imposed by the IMF in return for loans prevent countries from increasing public spending, making it difficult or impossible to provide education for all citizens. Many are therefore unable to meet their obligation to fulfil the fundamental right of free, basic education for all children, despite their commitment to do so in international agreements such as the Millennium Development Goals (MDGs) and under their own constitutions. On the one hand they are expected to honour their national commitments and achieve these internationally agreed goals, but on the other hand, the IMF tells them that they cannot increase their spending to a level necessary to achieve these goals.

To educate all children by 2015, countries will need to substantially increase their public spending and seek external resources that are sustained consistently over a decade or two. But this paper suggests that such spending increases would not be possible within the current constraints of the IMF macroeconomic framework and corresponding monetary and fiscal policies of Ministries of Finance and Central Banks.

This paper suggests the following as ways forward:

Actions in Africa, Asia and Latin America:

• demanding that governments are open about the trade-offs and sacrifices they have made when agreeing low-inflation/low-spending approaches with the IMF
• encouraging a dialogue between Ministries of Education, Health and those addressing HIV/AIDS regarding alternatives, especially around the time that budgets are formulated or presented
• supporting capacity building of southern parliamentarians ability to scrutinise IFI loan agreements including conditions
• pressuring the Ministries of Finance to take responsibility for their budget cutting actions.

Actions in G8 countries:

• urging your country’s representatives to the IFI boards to demand a revision to the IMF’s definition of macroeconomic stability
• questioning the impact of subordinating long–term fiscal policy tools to short-term monetary policygoals, and encouraging the move to "real economic targeting" based on employment levels, growth and human development indicators, rather than only basing monetary policy goals on very low inflation
• supporting the need for comprehensive Poverty and Social Impact Assessments on macroeconomic policy recommendations, which include assessments of multiple policy options and scenarios.

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