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Beyond Economics: Assessing IMF Austerity’s Effects on Women’s Rights

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By  Rameen Siddiqui

In the intricate web of global economic policies, the International Monetary Fund (IMF) plays a pivotal role as a financial lifeline for nations facing economic turbulence. Austerity measures, a common prescription offered by the IMF to stabilize economies, have been a subject of extensive debate and analysis for their far-reaching consequences. While austerity policies are intended to restore fiscal balance, their impact is far from uniform, often exacerbating existing inequalities. This article delves into the intersection of economic policy and gender dynamics, exploring how IMF austerity measures can reverberate through societies in ways that disproportionately affect women. From the erosion of social safety nets to the undermining of women’s access to essential services, we navigate the intricate landscape of austerity and its intricate implications for women’s rights.

Introduction to IMF Austerity

The IMF engages in regular economic monitoring of nearly all nations through its Article IV consultations, frequently providing policy recommendations. These suggestions might be disregarded by more affluent nations but wield significant influence over the policy decisions of less economically developed countries. In instances where countries face a debt crisis and require financial assistance from the IMF, which acts as a lender of last resort, the IMF imposed even more forceful policy advice and requirements. Over the past four decades, the essence of IMF guidance has remained largely unchanged, starting from the introduction of Structural Adjustment Programmes (SAPs). However, this guidance is presented, characterized, and marketed in novel ways.

The prevailing model followed by the IMF has been rooted in neoliberal ideology for many years. This ideology advocates for a specific set of policies, including austerity, the liberalization of markets, the removal of capital and exchange controls, the privatization of public services and government-owned enterprises, as well as a decrease in direct tax rates alongside an increased reliance on broad consumption taxes, all justified under the banner of economic ‘development’. The IMF’s definition of ‘development’ is narrowly confined to economic growth, despite these policies consistently facing criticism for eroding human rights and livelihoods, as well as regularly falling short of achieving the elevated growth rates promised.

The concept of structural adjustment places emphasis on prioritizing ‘fiscal fundamentalism’ rather than focusing on achieving economic and social equity and ensuring the realization of human rights. Governments primarily target the reduction of their fiscal deficits as a primary objective. A significant portion of the critique directed at IMF policy recommendations stems from this conventional macroeconomic perspective. This approach advocates for a shrinking government budget allocation for services while giving precedence to fiscal responsibility, even if it comes at the expense of other factors such as social, economic, and gender parity.

Gender Lens on Austerity

These measures of austerity, also known as ‘fiscal consolidation,’ have the potential to influence women’s rights through diverse channels. Nevertheless, it is the combined effect of these policies that is exceptionally destructive. The reduction of publicly provided childcare services in nations intensifies the impact of higher consumption taxes and weakened enforcement of labor regulations against discrimination. This combination adversely affects women’s ability to secure equitable wages and satisfactory employment opportunities. Reductions in critical public sector positions, where women constitute a significant proportion, such as in healthcare and education, are experienced acutely.

Austerity measures entail various ways through which women’s economic security is directly and unfairly jeopardized. Austerity packages frequently involve wage freezes and significant reductions in the public sector workforce. Given societal norms and workplace segregation, women predominantly occupy sectors in the public realm, often targeted for cutbacks. This includes vital frontline roles such as nursing, teaching, and social work, along with lower-level administrative and part-time positions. Consequently, these measures push a considerable number of women into unemployment, precarious employment, or informal labor markets. This transition leads to enduring financial and asset losses, potentially exacerbating gender-based wage disparities while undermining women’s overall economic well-being.

Regressive Fiscal Consolidation: A Threat to Women’s Rights

Sufficient funding for the public sector and investments in social programs and public services have been crucial for women’s economic rights in recent decades, ensuring access to quality employment. In contrast, reductions in public spending linked to austerity have resulted in cutbacks to essential social and physical infrastructure, including education, healthcare, and transportation services. These actions distinctly affect women more than men and hinder advancements in gender equality. This is compounded by the historical context of gender inequality and bias, structural disadvantages, biological distinctions, societal norms, and disparities in the practical application of laws and policies.

i). Budget cuts directly impact women’s income and economic security

Reductions in public expenditure have an uneven and severe impact on women, manifesting through distinct pathways. Broadly, the consequences for women’s rights due to budgetary cutbacks occur through three primary mechanisms: i) direct income losses, ii) curtailed access to crucial services, and iii) heightened burdens of unpaid labor and time scarcity. These factors are interdependent, exacerbating the overall negative effects on women. The repercussions of budget reductions on women’s income and economic stability are extensive and multifaceted

ii) Diminishing Public spending impedes women’s access to crucial services

Among the most insidious consequences of reduced public spending, marked by enduring and disproportionate impacts, lies in how these reductions amplify the obstacles often faced by women when accessing vital public services of high quality. On occasions, budget cuts are directed straight at programs and services primarily benefiting women. Frequently, these cuts extend to services that cater to the wider populace, such as healthcare or vocational training, yet are of particular significance to women due to their economic disadvantages or specific needs (e.g., heightened reliance on healthcare services for pregnancy and maternity needs). An additional measure under austerity is the introduction of fees for essential services, purportedly as a ‘cost-saving’ strategy, which unfortunately escalates disparities in access to care. This disproportionately affects women due to the gender pay gap and limited control they may exert over household finances.

iii) Austerity-driven fiscal restraint intensifies women’s unpaid care work and deprivation

A third vital aspect is the profound significance of austerity measures in exacerbating women’s unpaid care responsibilities and their ensuing time scarcity. Unpaid care labor across the globe is overwhelmingly carried out by women, with one estimate suggesting that women contribute three times as much unpaid care work as men on a global scale (UN High Level Panel, 2016). Particularly for women and girls grappling with poverty in regions marked by inadequate infrastructure and under-resourced public services (such as limited or absent access to piped water, affordable childcare, or eldercare), this translates into a considerable depletion of their time, energy, and prospects, often commencing from an early age. This unequal and burdensome distribution of unpaid care labor has been acknowledged as a substantial impediment to women’s exercise of their human rights, encompassing political engagement, healthcare, employment, and education opportunities.

Labor Market Impact: Road to Women’s Unemployment

The IMF has unequivocally advocated for and endorsed essential measures aimed at elevating female labor force participation rates in developing nations. However, the IMF’s professed objective of promoting women’s employment is undermined by a pivotal element within its supported policies across all three countries: the reduction of the public sector’s scope, which primarily employs women, achieved by constraining public sector job opportunities and curtailing wages. The Fund contends that “elevated public employment has been a deterrent to labor force participation. Notably, higher levels of public employment have correlated with reduced labor force participation, both globally and regionally, particularly among women.”

According to the IMF’s perspective, this phenomenon arises from the presence of higher-paying and secure positions in the public sector that extend benefits to the entire household. This, in turn, might discourage other family members, particularly women, from seeking additional paid employment. Consequently, the assertion is that diminishing public sector employment and diminishing the protection (alongside rights) it provides could motivate women to enter the labor market, as they would be compelled to do so in order to compensate for the reduction.

Gender-Based Violence and Vulnerabilities

An analysis of austerity’s impact on women’s rights must encompass the intricate interplay between economic policies, social services, and the intricate fabric of gender-based vulnerabilities as it extends beyond economic realms, intertwining with increased vulnerabilities to gender-based violence. The reduction in public services and social safety nets often forces women to navigate precarious circumstances, amplifying their exposure to various forms of violence and exploitation. Austerity-driven cuts to essential services like healthcare and education can create conditions where women’s physical and psychological well-being are compromised. Moreover, economic strain resulting from austerity policies can escalate tensions within households, contributing to an elevated risk of domestic violence. The erosion of social support systems, coupled with limited access to resources, can heighten women’s vulnerabilities, further undermining their safety and impeding their ability to exercise their rights fully.

Policy Recommendations:

The persistent unwavering trust of policymakers in the ‘austerity-for-growth’ fiscal misconception carries genuine economic, political, and human rights consequences, which cannot be mitigated solely through band-aid social safety nets and targeted gender equality initiatives. To uphold the commitments of governments to human rights principles, ensuring human rights and advancing gender equality during times of fiscal hardship necessitates a broader approach than short-sighted financial restraint. It requires adopting a progressive strategy centered on redistributive measures that shift the burden of adjustments onto those with greater financial capacity, rather than penalizing low-income women and their families, who often lack representation in mainstream political spaces.  More specifically, the IMF should:

1. Acknowledge within an officially sanctioned policy stance that achieving gender equality, encompassing the comprehensive realization of women’s human rights and the eradication of gender-based discrimination, demands substantial and continuous public investments. This includes investments in social and caregiving infrastructure, emphasizing that advocating for a reduction in state financial commitment might impede progress in attaining gender equality and fulfilling women’s human rights.

2. Persist in endorsing benchmarks for social expenditure, while guaranteeing that these benchmarks are adequately substantial to drive meaningful advancements in upholding women’s rights. These benchmarks should also be in line with the minimum essential public spending required to achieve pertinent Sustainable Development Goals. For example, allocate around 5 percent of GDP for healthcare (in accordance with WHO recommendations) and approximately 6 percent of GDP for education (aligned with the Education for All initiative’s recommendations).

3. Acknowledge that conventional macroeconomic strategies and loan programs possess inherent gender biases, affecting women’s roles in both productive and reproductive spheres. Incorporate a gender lens in the formulation of policies and programs, integrating it as a core aspect rather than an incidental addition.

4. Encourage governments to adopt legislation that is attuned to gender considerations, safeguarding women’s interests within the workforce. Ensure equitable working conditions in the private sector for both women and men. Engage women’s groups, workers’ unions, and other civil society organizations in shaping social and macroeconomic policies. In order to facilitate this and ensure the inclusion of women’s voices, it is essential for the IMF to confirm that its programs do not inadvertently contribute to constraining civic engagement.

5. Advocate for gender-responsive budgeting, facilitated through the participation of women-led civil society organizations. This approach empowers governments to allocate adequate resources for the effective implementation of laws, policies, and initiatives that promote gender equality.

Conclusion

In conclusion, the repercussions of IMF-led austerity measures on women’s rights are both profound and complex. The fiscal policies, often underpinned by the ‘cut-to-grow’ approach, inadvertently exacerbate gender disparities and hinder progress toward gender equality. While the IMF has acknowledged the importance of women’s empowerment, its policies, particularly those targeting public sector employment and social spending, can have adverse effects on women’s economic prospects, access to services, and vulnerability to gender-based violence. To truly advance gender equality and uphold human rights, a transformative shift is needed. This entails adopting a more holistic and gender-responsive approach to policy-making, focusing on robust social investment, inclusivity, and equitable distribution of economic burdens. By prioritizing women’s voices and needs, the IMF can play a pivotal role in not only mitigating the negative impact of austerity but also fostering sustainable development that benefits all members of society, irrespective of gender.

Courtesy: Modern Diplomacy


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BUSINESS & ECONOMY

A Labour Government Should not Frighten the Horses

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The UK general election is likely to mean changes, but Gulf citizens need not be too worried.

By James Drummond

If the tension was killing you, now you know. If it wasn’t, then be aware that a general election in the United Kingdom will be held on July 4 – less than six weeks away.

For the hapless Rishi Sunak, it looks like a case of “If it were done when ’tis done, then ’twere well it were done quickly.” Polls indicate that after 14 years of conservatism, real or imagined, voters are likely to elect a new Labour government.

What does this mean for us here in the Gulf?

The six Gulf states are certainly exposed to Britain. The extent of GCC holdings in the UK is enormous, ranging from Qatari ownership of the Shard building in London, stakes in the Sainsburys supermarket chain and Barclays bank, to Sheikh Mohammed bin Rashid’s Godolphin stables in Suffolk.

Manchester City and Newcastle United football clubs are owned by Emirati and Saudi interests, respectively. Kuwait’s wealth is managed by the Kuwait Investment Office near St Pauls Cathedral.

Labour has been careful to detail very few policies (or hostages to fortune, as its strategists may see it), but last week, David Lammy, the likely new foreign secretary, outlined a further campaign against dirty money.

Britain is a “corruption services centre”, while London is a “hotbed of kleptocracy”, Mr Lammy said. He said that he wanted to reward whistleblowers and clamp down on “enablers” of financial crime.

Given the paucity of public announcements, Lammy’s speech is significant, because it implies that the incoming government is likely to act. Fighting financial crime is relatively uncontroversial and attracts cross-party support – although in the UK’s case with limited success.

British politicians have made similarly grandiose statements before. But after Russia’s invasion of Ukraine, London has moved particularly against Russian dirty money, and sanctioned individuals. It finally introduced an obligation mandating the disclosure of beneficial owners of property.

Overseas trusts are also now required to disclose their ultimate beneficial owners, and there is now greater transparency when registering entities at Companies House.

This seems to have had only limited effect, however. Last week Andrew Mitchell, the deputy foreign secretary, cited estimates that 40 percent of the world’s dirty money still passes through London.

Spotlight on Corruption, a non-governmental organisation, wrote in October last year that “major reform is needed to how lawyers and accountants, the property sector and company formation agents are regulated for money laundering.” Lammy may choose to take further action against these and other professionals.

Other so-called enablers include retired politicians, some of them in the House of Lords, who work as advisors to unsavoury actors. Labour could move to tighten disclosure, although several of its senior former members are likely to lobby against further transparency.

It is also possible that Labour will go further in taxing expatriates. In its limited public commitments, the party has promised to clamp down on “tax dodgers”.

Those with property in the UK already pay tax on rental income they receive, and worldwide assets are subject to Britain’s inheritance tax. Some Gulf Arab families with UK property have been caught by inheritance tax.

A government led by Sir Keir Starmer, the Labour leader, could go further, as the US does, in taxing worldwide income of its citizens, more than 200,000 of whom live in the UAE alone. The argument is that if you have the privilege of carrying the passport, you have an obligation to pay tax.

Another question surrounds nationalisation. Labour is committed to re-nationalising the railways for one, although the infrastructure is already under central government control.

But another target may – may – be England’s water supply network, which was privatised in 1989. Shareholders in various of the rump companies include the Qatar Investment Authority and Adia of the UAE.

The water companies have been the subject of a vociferous campaign, for allegedly paying their shareholders high dividends while neglecting maintenance and investment. It is possible that an incoming Labour government will nationalise the industry.

All that said, the primacy of the rule of law and respect for property rights remain strong in Britain.

Barratt, a mass housebuilder, reported earlier this week that London remains the top choice among world cities for UAE investors looking to buy overseas. The holdings of Gulf states and rights of Gulf citizens in the UK remain secure, even with a Labour government.

James Drummond is Editor-in-Chief of the AGBi

Courtesy: The AGBI.Com


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Kuwait’s Political Crisis Adds to Economic Uncertainty

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Kuwait’s latest standoff is deeply concerning for both the near and long term, writes Andrew Cunningham

The decision by Kuwaiti emir Sheikh Mishal Al-Ahmad to dissolve the country’s recently elected parliament just days before its inaugural session on May 14 presents overseas investors and Kuwaiti citizens with more uncertainty.

The situation raises concerns about the country’s economic prospects over both the short and long term.

Disputes and stand-offs between Kuwait’s emirs and its boisterous parliament are nothing new. Parliament has been dissolved, and the constitution suspended, numerous times over the past 40 years. The country has held four elections in the past four years.

Squabbling between the two sides is rooted in political disagreements and this most recent outbreak is no different.

A major factor behind the latest dissolution is believed to have been parliament’s objection to Sheikh Mishal’s choice of crown prince. Although the crown prince is nominated by the emir, the appointment has to be ratified by the parliament.

But these political, and sometimes personal, disputes have real consequences for Kuwait’s economy and financial system and, ultimately, for the long-term welfare of its citizens.

Kuwait is a prosperous country. If we take a snapshot today, we see it producing nearly 2.5 million barrels of oil per day (bpd), and there are plans under way to increase production capacity to 4 million bpd by 2035.

State foreign reserves are around $930 billion, according to National Bank of Kuwait, the country’s largest bank. With a population of a little over 4 million, its GDP per capita is one of the highest in the world.

Squabbling between the two sides is rooted in political disagreements and this most recent outbreak is no different.

A major factor behind the latest dissolution is believed to have been parliament’s objection to Sheikh Mishal’s choice of crown prince. Although the crown prince is nominated by the emir, the appointment has to be ratified by the parliament.

But these political, and sometimes personal, disputes have real consequences for Kuwait’s economy and financial system and, ultimately, for the long-term welfare of its citizens.

Kuwait is a prosperous country. If we take a snapshot today, we see it producing nearly 2.5 million barrels of oil per day (bpd), and there are plans under way to increase production capacity to 4 million bpd by 2035.

State foreign reserves are around $930 billion, according to National Bank of Kuwait, the country’s largest bank. With a population of a little over 4 million, its GDP per capita is one of the highest in the world.

In March this year, rating agency Fitch described Kuwait’s fiscal and external balance sheets as among the strongest of any of the governments it rates.

But when we look at long-term trends, the picture is more complex and less secure.

Kuwaiti government spending remains overwhelmingly dependent on oil and gas revenues. The government has made almost no progress, over many decades, in diversifying the economy away from oil, or in reducing the huge burden of government salaries and welfare payments.

Oil and gas revenues currently account for nearly 70 percent of total income and, according to IMF projections, will continue to do so for the rest of the decade.

These revenues have served the country well in the past, despite the volatility of oil prices, but such overwhelming dependence looks foolhardy when consumers worldwide are striving to reduce consumption of oil and gas and investors and energy firms have pivoted towards renewables.

Nearly all of the Kuwaiti government’s non-oil and gas revenue arises from overseas investments and from dividends from state-owned companies. Tax revenues account for less than 1 percent of total government income.

Looking beyond the fiscal imperative to diversify the economy is the need to provide employment opportunities for Kuwaiti citizens.

No less than 84 percent of the Kuwaiti workforce was employed by the government at the end of 2022. It is hardly surprising that nearly half of government expenditure is allocated to the salaries of public employees.

Pressure for social spending will increase in the years ahead. A World Bank report, published last year, showed that levels of obesity and Type 2 diabetes were higher in Kuwait than in any of the other GCC countries and nearly double the average in OECD countries.

Partly as a result of this, the World Bank estimated that Kuwait’s old age dependency ratio – the number of people over 65 years old in relation to those of working age – will be nearly double that of its neighbours by 2040.

Kuwait is also a country that is being significantly affected, even today, by climate change. Temperatures during the summer can exceed 50 degrees, making Kuwait one of the hottest places on earth.

These are difficult and complex challenges, both economic and social, but they are hardly unique to Kuwait. That they are, in some cases, more acute in Kuwait than elsewhere is due to decades’ long procrastination and political paralysis.

The government’s General Reserve Fund, which held most of its liquid assets, was entirely depleted in September 2020, according to Kuwait’s own ministry of finance. With AA ratings, the obvious solution was to borrow money – Kuwait’s debt-to-GDP ratio is less than 5 percent. Yet the parliament has still not passed a so-called ‘Liquidity Law‘ that would allow modest issuance of foreign currency debt.

The parliament also held up the introduction of Value Added Tax (VAT), making Kuwait one of two of the six GCC countries not to fulfil a joint commitment to implement a minimum VAT of 5 percent.

Over the past four years, all three of the big international credit rating agencies have downgraded the government of Kuwait.

In their rating reports, all agencies cited a dysfunctional and slow-moving political environment that was reducing the country’s financial flexibility and delaying much needed economic and financial reform.

Politics matters.

It is unrealistic to think that after decades of enmity the ruling family and the parliament will soon form a harmonious working relationship.

But they do need to find some common ground that will enable them to start addressing fundamental economic and social issues while the country still has large financial reserves and strong credit ratings.

Time is running out.

Andrew Cunningham writes and consults on risk and governance in Middle East and sharia-compliant banking systems


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ICD and JSC Ziraat Bank Collaborate to Boost Uzbekistan’s Private Sector

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At the 3rd Tashkent Investment Forum, the Islamic Corporation for the Development of the Private Sector (ICD) and JSC Ziraat Bank Uzbekistan took a significant step forward in their partnership to empower small and medium-sized enterprises (SMEs) and foster economic growth in Uzbekistan. The forum, held in the capital city of Uzbekistan, brought together key stakeholders from the public and private sectors to discuss investment opportunities and economic development strategies for the region. The collaboration between the Islamic Corporation for the Development of the Private Sector (ICD) and JSC Ziraat Bank Uzbekistan is aimed at boosting the private sector in Uzbekistan.

During the forum, ICD and JSC Ziraat Bank Uzbekistan formalized an expression of intent to collaborate on various initiatives aimed at supporting SMEs. One of the key elements of this collaboration is the provision of a Line of Financing (LoF) facility by ICD to JSC Ziraat Bank Uzbekistan. This LoF facility will enable the bank to fund private sector projects as an agent of ICD, thereby providing SMEs with access to the necessary capital to initiate and grow their businesses.

The partnership between ICD and JSC Ziraat Bank Uzbekistan is expected to have a significant impact on the SME landscape in Uzbekistan. By equipping entrepreneurs with the resources they need to succeed, this collaboration will not only support the growth of individual businesses but also contribute to the overall economic development of the country. SMEs play a crucial role in driving economic growth, creating jobs, and fostering innovation, and this partnership will help strengthen the SME ecosystem in Uzbekistan.

JSC Ziraat Bank Uzbekistan, as a strategic partner for ICD, brings a wealth of experience and expertise to the table. As a prominent commercial bank with foreign capital, JSC Ziraat Bank Uzbekistan has a strong track record of supporting SMEs and promoting economic development. The bank’s partnership with ICD further underscores its commitment to advancing the private sector in Uzbekistan and its dedication to supporting the country’s economic growth.

ICD, for its part, is a leading multilateral development financial institution that focuses on supporting the economic development of its member countries through the provision of finance and advisory services to private sector enterprises. By partnering with JSC Ziraat Bank Uzbekistan, ICD is furthering its mission of promoting economic development and fostering entrepreneurship in Uzbekistan and across the Islamic world.

The LoF facility provided by ICD to JSC Ziraat Bank Uzbekistan is just one example of the many initiatives that the two entities are undertaking to support SMEs in Uzbekistan. In addition to providing financial support, the partnership between ICD and JSC Ziraat Bank Uzbekistan will also include capacity-building initiatives and technical assistance programs to help SMEs succeed in today’s competitive business environment.

Overall, the partnership between ICD and JSC Ziraat Bank Uzbekistan represents a significant step forward in supporting SMEs and fostering economic growth in Uzbekistan. By working together, these two institutions are helping to create a more vibrant and dynamic private sector in Uzbekistan, which will ultimately benefit the country’s economy and its people. The collaboration between the Islamic Corporation for the Development of the Private Sector (ICD) and JSC Ziraat Bank Uzbekistan is expected to have a far-reaching impact on the private sector in Uzbekistan.


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