Pete Carson: A Debt Jubilee will set up the global South for recovery from Covid-19

“When the wellbeing of your country is at the whim of rich governments and financiers, you often don’t have a back-up plan. You try and get on with things the best you can. By cancelling this year’s debt in order to give these countries a fighting chance, it will be a step forward in taking on the unsustainable debt crisis worldwide.”

On World Health Day, Jubilee Scotland’s Pete Carson argues that only debt cancellation can provide the global South with a fighting chance against the effects of the Coronavirus

AS MOST of us sit inside awaiting further instructions and anticipating positive news, in the back of our minds we might occasionally think “Soon this will be all over. We’ll get through this together, as a country.” There is hope that things will soon start to miraculously look up in Britain and the other countries that have been hardest hit by the virus. But on a global scale we are only at the beginning of the pandemic, the effects of which are expected to last for years.

If we don’t act quickly, Covid-19 will have a devastating impact on some of the most vulnerable communities on earth. We need to make sure they can cope financially or they face hardship beyond what we can dare to imagine. This is why Jubliee Scotland is one of more than 150 organisations calling for debt cancellation in the global South to fight the pandemic.

Debt inequality has always been a problem within the classist society in our country, with the UK being one of the most unequal countries in Europe. But the divide between the high-income nations of the global North and the struggling economies of the global South has been increasing in recent years. Many countries in the southern hemisphere are paying off loans from lender governments, the International Monetary Fund and the World Bank to support their infrastructure and the development of their countries. These debts can often lead to problems down the line, with inflation and demands for cuts to meet payments leading to increased rates of poverty.

In the months preceding the outbreak of the virus, it was found that the amount of Debt payments in these countries have increased rapidly, paying up to 12.4 per cent of an average government’s revenue in 2019, projected to increase up to 17.4 per cent in the next 2 years. For comparison, the repayment rate was an average of 5.5 per cent in 2011. As a result, the amount of public spending per person has started to fall in these countries.

Just like we were completely unprepared for a global outbreak, there is very little chance that the global south can handle a pandemic of this scale. The services in our own countries have already been under immense pressure, even though we can afford to spend 70 times more per person than the healthcare systems in low income countries.

We have been able to write off £13 Billion in debt for the NHS, a historic move that has been lauded by many, but that option just isn’t readily available for health services in the global South. While there have been calls from the IMF for payments to be delayed, we need to go further than that to help them in a way to make sure that they are not further marginalised  down the line. 

The concept of a Debt Jubilee is to cancel the unjustifiable debts of modern society, with the global Jubilee Campaign working since the 1990s to cancel the unjust debts of the global South. The Jubilee 2000 campaign led to $100 billion of debt owed by 35 of the world’s poorest countries being wiped clean from the slate. Now that these countries face a crisis unlike anything we have seen in a century, it is time for another Debt Jubilee.

On World Health Day, Jubilee Scotland has signed onto a joint letter sent to world governments, the IMF and the World Bank calling for the permanent cancellation of debt payments, interest and charges in 2020 from borrower countries. By freeing up $25 Billion of debt payments, the Global South will be better equipped to fight the threat of coronavirus. In addition to debt cancellation, $73.1 billion in emergency finance will be needed to support low income economies and their relief effort, provided through grants to prevent them from sinking deeper into debt.  

These plans for debt cancellation and financing need to be designed to specifically boost public spending, where it is going to serve the needs and maintain social protection of the people. The role of G20 countries should be to vigorously enforce this to prevent any country from facing penalties from cancelled payments.

However, this should not be viewed as a stopgap to tide people through the crisis. This is only the starting point to help restructure unsustainable debts, which needs to be taken seriously with a long term approach and cooperation of the United Nations and IMF. Mere suspension of these debts will only cause further problems down the line, delaying a true overhaul of a system of debt that aims to be altruistic, but turns a blind eye when money’s on the line. The domino effect of Covid-19 has already led to falls in commodity prices and projected increases in borrowing costs in the global south, with limited resources at hand to handle a public health crisis. 

The virus is shaking the ground beneath capitalism and the way things are governed in well-off nations like the UK, but when you’re in control of your own safety net you can afford to take a hit of instability here and there. When the wellbeing of your country is at the whim of rich governments and financiers, you often don’t have a back-up plan. You try and get on with things the best you can. By cancelling this year’s debt in order to give these countries a fighting chance, it will be a step forward in taking on the unsustainable debt crisis worldwide. 

Picture courtesy of Friends of the Earth International

Statement: A debt jubilee to tackle the Covid-19 health and economic crisis

1. What we are calling for

We, the under-signed organizations, aware of the severe impacts on hundreds of millions of people fromthe health, social and economic crises faced by countries in the global South as a result of Covid-19, urgently call for:

  • Cancellation of all external debt paymentsdue to be made in 2020.
  • Provision of emergency additional finance which does not create debt.

All principal, interest and charges on sovereign external debt due in 2020 should be cancelled permanently, they should not accrue into the future. Cancelling debt payments is the fastest way to keep money in countries and free up resources to tacklethe urgent health, socialand economic crises resulting from the Covid-19 global pandemic.

2. Implementing cancellation of debt payments

Borrower governments have it within their power to stop makingdebt payments but they should not suffer any penalties for doing so. All lenders should therefore agreetothe immediate cancellation of debt payments falling due in 2020, with no accrual of interest and charges and no penalties.

In the absence of a wider, multilaterally agreed debt cancellation, lenders should take the following steps:

  • Multilateral institutions, including the IMF and World Bank, should offer an immediate cancellation of all principal, interest and charges for the remainder of 2020 for all countries in need, and most urgently for all PRGT and IDA countries.
  • The IMF and World Bank should urge any country ceasingmultilateral and/or bilateral debt payments to also cancel paymentsto private external lenders. Any new IMF and World Bank finance should be in the form of grants not loans, and require other lenders to reprofile the debt where sustainability is uncertain, or restructure their debt where it is unsustainable, to help ensure money is used to support public policy priorities in response to the COVID-19 crisis, rather than to repay other lenders.
  • Lender governments, both Paris Club members and others such as China, Saudi Arabia and Kuwait, should cancel all principal, interest and charges for the remainder of 2020 for all countries in need, and most urgently for all PRGT and IDA countries. Ideally a debt cancellation should be coordinated between lenders but should not wait for them all to agree.
  • The G20 should support moves by any country to stop making payments ondebt toprivate external lenders.
  • Key jurisdictions, especially the UK and New York, should pass legislation to prevent any lender suing a government for stopping debt paymentsin 2020.
  • Debt payment cancellations and additional finance should be free of economic policy conditionality promoting privatisation, deregulation and trade liberalisation. The crisis has been caused by exogenous shocks: developments over which countries in the global south had no control.
  • Debt payment cancellation and additional finance should be designed specifically to bolster public expenditure targeted at protecting the rights and needs of populations, especially to maintain and increase social protection and health spending in response to COVID-19 and ensure relief goes directly to benefit those in need.

3. Resolving the debt crisis

Many countries were in debt crisis before the Covid-19 crisis began. Many more will emerge from this crisis with even higher unsustainable debts. Immediate cancellation of debt paymentsshould therefore be linked to a more comprehensive and long-term approach to debt crisis resolution. As such, to make debt restructuring more efficient, equitable and successful we call for:

  • The creation through the United Nations of a systematic, comprehensive and enforceable process for sovereign debt restructurings.
  • The IMF to introduce clear guidelines on when a debt is unsustainable, and follow its policy only to lend to countries with unsustainable debts if there is a default or debt restructuring.

A process to make these changes must begin before the end of 2020.

4. The impacts of Covid-19

The global Covid-19 crisis has led to falls in commodity prices, an increase in future borrowing costs for global South governments, and contributed to the largest ever capital outflow from developing countries. Government revenues will fall as a result, and debt payments will increase at the same time that countries need to expand healthcare and social protection in response to the crisis. Developing countries had already been facing heightened debt vulnerabilities and rising debt costs before the Covid-19 outbreak. The scale of the public health crisis and need for rapid policy responses means vital government resources must be urgently directed towards the needs of populations and not diverted to lenders. The outbreaks of Covid-19 so far show that time is essential. Governments need to have resources for decisive action today. Any delay will make the pandemic more difficult to control and a later repair of economic damage more costly, especially for borrower countries.

We estimate cancellation of external debt payments in 2020 for 69 countries classified by the IMF as Lower Income Economies and for which data is available, would save $19.5 billion in external debt payments to bilateral and multilateral lenders in 2020, and $6 billion in external debt payments to private lenders. If it was extended to 2021 it would save a further $18.7 billion in multilateral and bilateral payments and $6.2 billion in external payments to private lenders.

5. Support for action on debt cancellation

African Finance Ministers have called for a suspension of all interest payments in 2020, and all principal and interest payments by fragile states. The IMF and World Bank have called for a suspension of all debt payments by the poorest countries to other governments. The United Nations Secretary General has called for debt restructuring, including waivers on interest payments in 2020. Prime Minister of Pakistan Imran Khanhas called for a debt write-off for his and other vulnerable countries. Ecuador’s Congress has also called on the government to suspend debt payments. In early March Lebanon defaulted on private external debt payments and has announced it will stop paying all foreign currency bonds. Ethiopian Prime Minister Abiy Ahmed Ali has called for a widespread debt write-off, with any remaining debt not payable for ten years and limiting debt payments to 10% of exports.

Endorsed by:

International organisations and regional networks

  1. African Forum and Network on Debt and Development (Afrodad)
  2. Asian Peoples’ Movement on Debt and Development (APMDD)
  3. Latin American Network on Debt, Development and Rights (Latindadd)
  4. European Network on Debt and Development (Eurodad)
  5. Oxfam
  6. ActionAid International
  7. CCFD-Terre Solidaire
  8. Christian Aid
  9. The ONE Campaign
  10. Save the Children
  11. Fundación Educación y Cooperación – EDUCO
  12. Society for International Development
  14. Medical Mission Sisters
  15. Africa Development Interchange Network
  16. Global Policy Forum
  17. Debt Relief International
  18. Youth for Tax Justice Network (YTJN)
  19. Fair Finance International
  20. Oil Change International
  21. Missionary Oblates of Mary Immaculate
  22. Sisters of Charity of Nazareth Congregational Leadership
  23. Federación Internacional Fe y Alegría
  24. Platform to Protect Whistleblowers in Africa (PPLAAF)
  25. International Budget Partnership

National organisations

  1. Jubilee Australia
  2. 11.11.11, Belgium
  3. CNCD-11.11.11, Belgium
  4. Entraide et fraternité, Belgium
  5. Federação Nacional do Fisco Estadual e Distrital (FENAFISCO), Brazil
  6. FOAESP – Fórum das Ong Aids do estado de São Paulo
  7. Gestos (HIV and AIDS, communication, gender), Brazil
  8. Grupo de Resistência Asa Branca (GRAB), Brazil
  9. Instituto de Justiça Fiscal (IJF), Brazil
  10. Outras Palavras Comunicação Compartilhada, Brazil
  11. Plate Forme d’Information et d’Action sur la Dette (PFIAD), Cameroon
  12. Forum des Organsations Nationales Humanitaires et de Développement en RD Congo
  13. PC2D (RD.Congo) et Caritas Congo ASBL
  14. Commission Justice et Paix de Pointe Noire, Republic of Congo
  15. Convention de la Societe Civile Ivoirienne (CSCI)
  16. Plate forme d’autonomisation des organisations de jeunesse de Côté d’Ivoire(PAOJCI)
  17. Ecumenical Academy, Czech Republic
  18. ActionAid Denmark
  19. Jubileo 2000 Red Ecuador
  20. Finn Church Aid, Finland
  21. Action contre la Faim, France
  22. Amis de la Terre France
  23. Attac France
  24. Centre de Recherche et d’Information pour le Développement (CRID), France
  25. Confédération Générale du Travail (CGT), France
  26. Coordination SUD, France
  27. Global Health Advocates France
  28. Plateforme Française Dette & Développement (PFDD), France
  29. Réseau Foi & Justice Afrique Europe antennne France
  30. Solidaires Finances Publiques, France
  31. Bündnis Eine Welt Schleswig-Holstein e.V.
  32. – Entwicklung braucht Entschuldung (Jubilee Germany)
  33. Transform! Europe, EU
  34. Debtfree, Greece
  35. Plateforme d’Information et d’Action sur la Dette et le Développement- Guinée (PIADD)
  36. Plateforme nationale des Citoyens Unis pour le Développement (PCUD)
  37. Fe Y Alegria Honduras
  38. Friends of the Earth Hungary
  39. Financial Justice Ireland
  40. Institute of Public Finance Kenya
  41. Sustainable Development Institute, Liberia
  42. Centre for Social Concern, Malawi
  43. Centre for Social Accountability & Transparency, Malawi
  44. Integrity Platform, Malawi
  45. Equidad de Género: Ciudadanía, Trabajo y Familia, Mexico
  46. Mozambique Budget Monitoring Forum
  47. Mozambican Debt Group
  48. Both ENDS, Netherlands
  49. BudgIT Foundation, Nigeria
  50. Debt Justice Norway
  51. Freedom from Debt Campaign of Pakistan
  52. Oikos – Cooperação e Desenvolvimento, Portugal
  53. Budget Advocacy Network, Sierra Leone
  54. Enabanda, Slovenia
  55. Alianza por la Solidaridad-Action Aid España
  56., Spain
  57. Fundación Entreculturas, Spain
  58. Ingeniería sin Fronteras, Spain
  59. – Organitzacions per a la Justícia Global – Catalunya
  60. Observatorio de la Deuda en la Globalización, Spain
  61. Observatorio de Multinacionales en América Latina (OMAL)-Paz con Dignidad, Spain
  62. Plataforma Auditoría Ciudadana de la Deuda, Spain
  63. Act Church of Sweden
  64. Diakonia, Sweden
  65. Alliance Sud, Switzerland
  66. Action for Argentina, UK
  67. Action for Southern Africa, UK
  68. Bretton Woods Project, UK
  69. Cafod (Catholic Agency for Overseas Development), UK
  70. Gender and Development Network, UK
  71. Global Justice Now, UK
  72. Jubilee Debt Campaign, UK
  73. Jubilee Scotland
  74. Stamp Out Poverty, UK
  75. Tearfund, UK
  76. The Equality Trust, UK
  77. Jubilee USA
  78. Maryknoll Office for Global Concerns, US
  79. Sisters of Charity Federation, US/Canada
  80. ActionAid Zambia
  81. Campaign for Active Voter Engagement in Zambia
  82. CUTS International, Zambia
  83. Zimbabwe Coalition on Debt and Development