UN Independent Expert links International Financial Institutions’ austerity push to Human Rights impacts
This week, the UN Independent Expert on Foreign Debt and Human Rights, Juan Pablo Bohoslavsky, released a report on the role of International Financial Institutions (IFIs) in imposing economic reforms that violate human rights. In particular, the report highlights how widespread promotion of austerity measures has had an adverse effect on human rights impacts in a number of countries. The document is due to be presented to the UN General Assembly in October.
In line with Eurodad findings, the Independent Expert questions the basic assumptions used to justify the introduction of austerity measures. Rather than contributing to economic growth, they tend to aggravate economic recession, worsening debt ratios and inequality. The IFIs widely prescribe such policies through lending and attached conditionalities, surveillance, and technical assistance.
In his report, Bohoslavsky cites Eurodad research demonstrating that 23 out of 26 IMF loan programmes agreed in 2016-2017 required recipient countries to implement belt-tightening measures, including cuts to public sector employee levels and pay, regressive tax reforms, spending cuts, targeting of social protection, privatisation of state-owned enterprises and subsidy reduction. All of which result in a “series of negative human rights impacts” and a disproportionate impact on women.
In addition, the World Bank (WB) is very influential in shaping economic policies and institutions in recipient countries. Referring to Eurodad research, Bohoslavsky’s report highlights the role of the WB’s conditional Development Policy Financing in promoting regulatory reforms that pave the way for increased private sector participation, which is in line with the WB’s Maximizing Finance for Development approach. However, as there are no systematic human rights impact assessments (HRIAs), these reforms can undermine states’ obligations under international human rights law: “Shifting the provision of essential services to profit-driven corporations can negatively impact human rights and the viability of the public sector.”
Confirming Eurodad’s long standing position, the report explains that IFI conditionality undermines genuine democratic ownership of development policies: “Because of the usual circumstances in which States find themselves when seeking assistance from international financial institutions, conditionalities are often imposed and are not necessarily negotiated with borrower States, not to mention their populations, who are even less involved in the associated consultations, discussions or negotiations.”
The Independent Expert establishes that IFIs can be held responsible, if they are found to be complicit in imposing or prescribing harmful economic reforms through policy advice and conditional lending. This responsibility has legal consequences: harmful reforms must be halted immediately, safeguards put in place to prevent any repetition and suitable compensation offered for losses suffered as a consequence.
In his report, the UN Independent Expert stresses that HRIAs have to be used counteract the harm caused by such IFI practices. In fact, independent, gender-sensitive HRIAs should become integral to every stage of the economic policy planning cycle. In other words, their findings should inform the design of such policies and guide any consequent reform decisions. They should also be used as a reference when reforms are implemented and evaluated on afterwards. In essence, both ex ante and ex post HRIA should be an integral part of the economic policy planning cycle and decision-making, negotiation processes and official working methods between IFIs and borrowers.
But even prior to a country being in a position of debt distress, and consequently being subject to emergency lending, such HRIAs could be important. Currently, the IMF and WB assess the sustainability of impoverished countries’ debt burdens using purely economic factors. This must change. Instead, the impact of debt on a country’s ability to finance internationally agreed development goals and to meet their human rights obligations must be taken into consideration. In practical terms, this means systematically implementing gender-sensitive HRIAs when conducting debt sustainability analyses and then ensuring the findings are used to support more timely triggering of debt restructuring or debt relief operations, as well as guiding related decision-making (e.g. on the revision of repayment terms).
Additionally, the unequal relationship between borrowers and IFIs, compounded by weak consultation of affected populations, is not a solid foundation to guarantee democratically-owned economic policies. Policy-making, which is informed by HRIAs and broad-based civic consultations, has a greater potential to generate positive rights-based development outcomes.