The global south is being left at the mercy of the financial markets. We must keep campaigning to prevent a full-blown debt crisis

The global south is being left at the mercy of the financial markets. We must keep campaigning to prevent a full-blown debt crisis

By: Nick Dearden
Date: 23 July 2020

While lockdown is easing here in Britain, across the world coronavirus cases continue to rise. In some countries, like El Salvador, health systems have been overwhelmed. In others, including parts of India, strict lockdowns have had to be reimposed in parts of the country. Across Africa, infections are rising rapidly.

This pandemic is far from over. And while it isn’t easy for any country, it’s particularly obscene that, as governments across the global south struggle to deal with the health crisis and its economic ramifications, they continue to pay hundreds of millions of pounds to some of the richest banks and hedge funds on earth.

Last week we launched a report with Jubilee Debt Campaign, Oxfam and Christian Aid, which showed that even in the middle of a pandemic, lower income countries are paying $2.8 billion a month servicing their debts – with nearly $1 billion every month going into the coffers of large banks and investment funds.

Letting the private sector off the hook

At the weekend, G20 finance ministers met online to discuss the next steps in their response to the pandemic. Last time they met, back in April, we campaigned for cancellation of debts that are preventing southern countries from ramping up spending on healthcare and social protection. And some relief was given, but nowhere near enough. To date, there has been a suspension of payments on some debts to some of the countries, for this year. But everyone, from the IMF to the UN to the African Union, says it’s totally inadequate.

We were particularly concerned that nothing was done to force the private sector – the banks and investment funds – to cancel Southern debts. Sadly, that means even the inadequate relief which has been agreed is being diverted into the pockets of super-rich investors. In fact, as Jubilee Debt Campaign showed last week, even some of the emergency loans being given to southern counties are effectively doing no more than bailing out rich creditors.

We’ve been here before. Back in the early 1980s, public institutions like the IMF and World Bank gave huge loans to Africa, Latin American and Asian countries, to bail out the reckless lending of the big banks. Those countries were then saddled with that debt for more than two decades. They were forced to undertake ‘structural adjustment’ – austerity, privatisation and forced opening of their markets – just to stay afloat and keep the loans coming in. The result was catastrophic for poverty and inequality in dozens of countries.

We can’t let this happen again. That’s why, last week, we joined campaigners from across the world to demand more from the G20 summit. We pointed out how 64 southern countries are spending more on foreign debt payments than on healthcare. Take Kenya. While many poorer Kenyans still have almost no access to healthcare, the government will spend $2.7 billion servicing its debt this year, more than the $1.9 billion it spends on healthcare.

Going backwards

Global leaders and officials agreed that the situation was dire. Even World Bank head David Malpass said on Saturday that the situation “is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency.”

The G20 didn’t listen. Their statement failed to grant proper debt cancellation, failed to force private creditors or multilateral banks to participate, failed to extend the number of countries eligible for debt relief and failed to extend the period for which relief was available. In fact they went backwards, with language weaker than we saw in April.

But we can’t give up. What we’re asking for is essential to dealing with the deep problems with the global economy – a debt system that puts the profits of the wealthiest ahead of the needs of humanity. We need a big transformation and it’s going to take time to build pressure for that change.

Vitally, we need serious debt cancellation, and it must include private sector creditors, forcing the banks and investment funds to write down debts. There is no justification for investors to profit while millions of people face impoverishment. It is obscene that some of this debt is being traded in global markets, with some debts doubtless being bought by ‘vulture funds’ intent on suing countries who are left with no option but to default on it.

So in the weeks and months ahead we will continue to build a more powerful coalition, with our friends at Jubilee Debt Campaign, for real debt cancellation. In fact we need a complete global reset if we’re to overcome the immense challenges we face. Part of that reset needs to be a radically different debt and financial system, a system which has visited catastrophic damage on the world. If we can get a few steps further along the road to a more just and equal world, perhaps we can pull something positive out of this awful situation in which we find ourselves.

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