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A person wrapped in plastic walks outside the headquarters of the International Monetary Fund during the onset of the Covid-19 pandemic in Washington on April 15, 2020. Photo: AFP
The world is confronting multiple, compounding crises, from Covid-19, energy, inflation, debt and climate shocks to unaffordable living costs and political instability. The need for ambitious action cannot be greater.

However, the return of failed policies such as austerity, now called “fiscal restraint” or “fiscal consolidation”, and a lack of effective taxation and debt-reduction initiatives threaten to exacerbate the macroeconomic instability and daily hardships that billions of people are facing. Unless policymakers change course, an “austerity pandemic” will make global economic recovery even more difficult.

As we show in a recent report, the looming wave of austerity will be even more premature and severe than the one that followed the 2008 global financial crisis. An analysis of International Monetary Fund expenditure projections indicates that 143 governments will cut spending (as a share of gross domestic product) in 2023, affecting more than 6.7 billion people – or 85 per cent of the world population.

In fact, most governments started scaling back public spending in 2021, and the number of countries slashing budgets is expected to rise through 2025. With average spending cuts of 3.5 per cent of GDP in 2021, this contraction has already been much bigger than in earlier shocks.

Even more worryingly, upwards of 50 countries are adopting excessive cuts, meaning their spending has fallen below their (already low) pre-pandemic levels. This cohort contains many countries – including Equatorial Guinea, Eswatini, Guyana, Liberia, Libya, Sudan, Suriname and Yemen – with large unmet development needs.

The austerity measures that governments are considering or already implementing will be deeply harmful to their populations, and especially to women.

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