IMF-required austerity cuts quadrupled over past decade, and new Fund policy is poised to push for even deeper and harsher cuts
ISLAMABAD /DNA/: The International Monetary Fund (IMF) has required borrowing countries to quadruple the size of their austerity cuts over the past decade, while simultaneously weakening the protection afforded to social spending in its loan programs, reveals new Oxfam analysis. These cuts undermine vital spending on public services – from healthcare to education and housing – that protect low-income communities.
The findings come ahead of the conclusion of the IMF’s 2026 Review of Program Design and Conditionality, amid fears that the Fund could return to 1980s-style structural adjustment by demanding “frontloaded” cuts, which require governments to slash public spending in bulk at the start of a program rather than phasing in cuts over multiple years.
Oxfam’s analysis shows that median annual IMF-required austerity cuts (“budget-balance targets”) increased from 0.21 percent of GDP between 2012 and 2017 to 0.85 percent of GDP between 2018 and 2025, a four-fold increase.
Between 2018 and 2025, the IMF required nearly half of countries (25 out of 54) to cut public spending by more than 2 percent of GDP over the course of their program, compared to just one-third (12 out of 42) between 2012 and 2017. Low-income countries spend on average 0.8 percent of GDP on social protection while spending on education remains below 4 percent of GDP.
Oxfam warns that the IMF could now seek to embed “frontloaded fiscal adjustment” as a core requirement across future programs. This is reminiscent of the ill-fated “shock therapy” approach, which not only imposes deeper and harsher cuts, but also severely restricts the ability of people and civil society organizations to assess the impacts of economic policies during the lifecycle of a loan program.
The IMF relies on “social spending floors” to address the harmful impacts of its programs. These floors typically require minimum spending on basic safety nets for targeted, poorer populations. Oxfam’s analysis shows that while more programs now include these floors, the protection they offer is shrinking. The median IMF-required social spending floor fell from 25 percent of current spending between 2012 and 2017, to 11 percent between 2018 and 2025.
“The IMF is in danger of regressing to the dark ages of structural adjustment,” said Oxfam International Senior Policy Advisor Nabil Abdo. “Frontloading austerity is like asking countries to swallow a whole bottle of poison that we already know is harmful in small doses – and then face the next shock with fewer doctors, fewer teachers and a weaker safety net. You can’t build economic resilience by dismantling the very structures that make societies resilient.”
Oxfam is urging the IMF Board of Executive Directors, ahead of its 14 September meeting, to reject a return to structural adjustment under the guise of “frontloaded fiscal adjustment” and to ensure its programs don’t exacerbate inequality. The IMF should prioritize alternatives to austerity, including progressive tax policies like taxes on wealthy individuals and corporate windfall profits, to build sustainable revenue without pushing millions more people into poverty.
