IMF austerity packages for East Asia failed to stem the region's financial crisis. However, they did give rise to full-blown recession with appalling consequences for the poor and vulnerable: in Indonesia alone 100 million people will be living in poverty by the end of the year - a fourfold increase over 1996. In Brazil, the IMF is in danger of repeating the same policy mistakes it made in East Asia.
The article suggests that Brazil is showing "courage" in implementing austerity measures "being pushed through at great ... social cost". But it is likely that the poor will end up paying disproportionately for financial stability through further cuts in social spending. Basic health care and education are already in a parlous state and Brazil's 50 million poor cannot afford further declines in quality and access to these services. Fiscal and trade deficits have to be reduced but this should be through reallocated and progressive taxation.
Throughout the global financial crisis it is the poor who have paid the heaviest price for the consequences of under-regulated capital markets. National and international action is needed now to create a regulatory framework for a more stable and efficient market. This would involve the development of effective controls on capital movements, such as Chile's tax on short-term capital investments; action to reduce the incentives for high-risk capital flows, such as an end to bail-outs; and improved transparency and accountability of banks.
International Director, Oxfam GB
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- Eastern Asia (the Far East)
- Financial Crisis
- International Monetary Fund