Income inequality is high or increasing in 60 percent (64 out of 106) of low- and middle-income countries receiving grants or loans from the International Monetary Fund (IMF) and World Bank, reveals new Oxfam analysis ahead of the 2024 Spring Meetings in Washington D.C. Countries with high levels of income inequality have Gini coefficients above 0.4, the warning level set by the United Nations.
- Income inequality has increased in 37 countries over the past decade, including Burkina Faso, Burundi, Ethiopia and Zambia.
- Income inequality is high in Ghana, Honduras, Mozambique and 39 other countries.
“The IMF and World Bank say that tackling inequality is a priority but in the same breath back policies that drive up the divide between the rich and the rest. Ordinary people struggle more and more every day to make up for cuts to the public funding of healthcare, education and transportation. This high stakes hypocrisy has to end,” said Kate Donald, Head of Oxfam International’s Washington D.C. Office.
“Agreement last year by the World Bank to target cuts in inequality for the first time in its 80-year history is a landmark move. But if the Bank is serious about tackling inequality, the first test will be making it a headline priority for its lending to the world’s poorest countries, being discussed now at the Spring Meetings,” said Donald.
Donor contributions to the Bank’s International Development Association (IDA), which provides grants or low-interest loans to the world’s poorest countries, over half of which are in Africa, have flatlined in recent years despite growing needs. World Bank President Ajay Banga has called on donor governments to make the next IDA replenishment the “largest of all time.”
Low-income countries also face a debt crisis, making an ambitious IDA21 replenishment all the more urgent. Ballooning debt and interest repayments are diverting scarce resources from crucial areas like public education and healthcare and social safety nets, threatening to unravel hard-won development gains. Based on World Bank analysis, Oxfam finds that half of IDA-eligible countries are overindebted and need nearly half (45 percent) of their debt cancelled.
Higher taxes on the income and wealth of richest could raise trillions of dollars to plug IDA funding shortfalls and to fill the huge development and climate funding gaps in low- and middle-income countries. G20 Finance Ministers meeting in Washington D.C. during the Spring Meetings could play an instrumental role in unlocking this investment. Brazil, the current G20 Chair, has called for a global plan to ensure the world’s super-rich pay their fair share in tax. France has since added its support.
Any global deal must ensure the super-rich are taxed at a rate ambitious enough rate to bring down inequality. For example, an annual net wealth tax of more than 8 percent would be needed to reduce billionaire wealth.
“We don’t buy the excuse that ‘we can't afford it’ —the money is there; it's just not flowing to where it’s needed. We urgently need donor governments to step up their contributions to IDA, and for the G20 to move forward with a global deal to tax the super-rich. It’s all part of ensuring that rich countries and rich people pay their fair share towards tackling inequality and climate breakdown,” said Donald.
ENDS
Annie Thériault in Washington DC | annie.theriault@oxfam.org | +51 936 307 990
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Oxfam spokespersons will be available for interviews in Washington D.C. during the Spring Meetings.
Oxfam, together with allies including ICRICIT and Tax Justice Network Africa, is organizing a high-level panel in Washington DC on April 17 at 4pm - 5:30pm titled “The path for taxing the super-rich – towards a progressive global taxation agenda”. Panelists: Guilherme Mello, Joseph Stiglitz, Gabriel Zucman, Esther Duflo, Chenai Mukumba and Katherine Baer. Building: IMF HQ2. Room: HQ2-03B-768B Lecture Room.
Data for Oxfam’s calculations on rising or high inequality are from the World Bank’s Poverty and Inequality Platform. Inequality data are available for 106 low- and middle-income countries with loans from the IMF and World Bank.
The Gini coefficient is a typical measure of income inequality. The coefficient varies between 0 and 1, with 0 representing perfect equality and 1 perfect inequality. High income inequality is defined as an income Gini coefficient larger than 0.4.
Under pressure from hundreds of former World Bank staff members and over 200 economists including Jayati Ghosh, Thomas Piketty and Joseph Stiglitz, the Bank last year announced that it would set a corporate goal on inequality for the first time since it was established in 1944. The new goal will aim to reduce the number of countries with high inequality.
In December 2023, World Bank President Ajay Banga called on member countries to make the next IDA replenishment “the largest of all time.”
The current IDA cycle ends in June 2025 and the next cycle, IDA21, will run from July 2025 to June 2028.
To estimate the proportion of external public debt that would need to be cancelled, Oxfam calculated the excess debt for each of the World Bank’s four metrics of debt sustainability, and selected the metric with the most excessive debt for each country. Three overindebted IDA-eligible countries (Pakistan, Sri Lanka and St Lucia) are excluded from these calculations because the World Bank uses another debt sustainability assessment methodology for them.
Oxfam has calculated that to keep billionaires’ wealth constant over the last two decades, we would have needed an annual net wealth tax of more than 8 percent across all countries. To keep their wealth constant between 2016 and 2021, we would have needed an annual net wealth tax of 12.8 percent.