Banks in Scotland must cancel Zambia’s debt
Imagine your country was in such dire financial straits that instead of funding vital healthcare and vaccines for you and fellow citizens during this pandemic, your government was forced to divert crucial public money to pay off its debts.
When the coronavirus hit, you watched as governments in the global north were encouraged to go further into debt to tackle the crisis, with low interest rates meaning they will not need to rush to pay back any extra borrowed money. But as the pandemic hits your own country, government revenues collapse, trade is dramatically decreased yet your country is expected to prioritise its debt repayments even if that means the government is unable to afford to take measures to tackle the health crisis that coronavirus causes.
Imagine that on top of concerns about becoming seriously ill from Covid-19 and being unable to rely on a hospital bed becoming available for you or your loved ones, food prices were also rising to unaffordable levels because your country is struggling to afford debt repayments.
Imagine that your government could no longer afford repayments and had to default on its debt. Your government asked for respite from these repayments, but it wasn’t granted by your creditors.
Imagine that you knew this debt was owed to private creditors based in the global north, who might make 250 per cent profit on that debt if it was paid back in full. The amount of profit they could earn from these loans was increasing as (and partly because) your country’s situation was worsening. That a billionaire owned at least one of the companies your government owed money to, and the high interest loan being repaid was helping make him richer.
You would feel cheated, outraged at this injustice, right?
This is the situation for Zambians right now.
Throughout the pandemic, large banks and speculators with a big presence in Scotland’s cities – including Blackrock, JP Morgan, HSBC and Aberdeen Standard Investments – have continued to demand debt repayments from some of the poorest countries across Africa, Asia and South America.
Instead of prioritising saving lives, these countries have had to service crippling debts.
Right now, African governments are spending three times more on debt repayments to private banks than it would cost to vaccinate the entire continent against Covid-19.
In Scotland, we are calling for the Scottish government to speak out about this injustice, and call on the banks, who have such a significant presence in Scotland’s cities, to cancel the debt.
Zambia is one of the Scottish government’s international development partner countries. The government talks proudly about our ‘historic friendship’ with Zambia. Over the last five years, the Scottish government has given £10 million to Zambia for projects helping healthcare, education and small-scale farming. Yet this is dwarfed by Zambia’s annual debt repayments which this year will be £1.34 billion, with £756 million going to private banks and asset managers like Blackrock.
Zambia has recently been forced to default on its debt, unable to afford to make repayments due in November of last year. It has asked for a break from loan repayments to the banks – but so far this has not been granted.
During the pandemic, Zambians have been hard hit by rising food prices and job losses. And the nation’s debt crisis is making the situation worse. They are facing a sharp rise in prices for items such as bread, cereals, fish, dried foods and vegetables with annual inflation rising by a quarter.
Even before the pandemic, crucial public services like health, water and sanitation have consistently received less than a quarter of the public money allocated to debt payments by the Zambian government.
Compare this situation to the vast wealth managed by Zambia’s creditors. Multi-trillion dollar asset manager Blackrock alone holds close to US$1 billion of ‘Eurobonds’ in Ghana, Kenya, Nigeria, Senegal and Zambia. Blackrock’s share profits were up by 16 per cent in the second quarter of 2021. Its CEO, billionaire businessman Larry Fink received an 18 per cent pay rise this year and is the highest paid CEO in asset management. Blackrock and other creditors can expect to receive between 75 per cent and 250 per cent profit from Zambia’s high interest loans, if they are paid back in full.
It is imperative that banks and speculators who are profiteering in this pandemic cancel Zambia’s debts in order to give the country the best chance to tackle the crisis, recover economically, and deal with future challenges such as the impact of climate change on the country.
Rich country governments must speak out
While governments in the global north have agreed to debt relief from government loans, they have not done enough to force the banks headquartered in their countries to do the right thing and cancel the debt. Even the World Bank President, David Malpass, has been critical, saying:
G20 countries…need to forcefully encourage the private creditors under their jurisdiction to participate fully in sovereign debt relief efforts for low-income countries
And his words have been echoed by the heads of the UN and the International Monetary Fund. As a self-proclaimed long-time friend of Zambia, the Scottish government needs to show solidarity and speak out against this injustice.
The Scottish government must speak out
We are calling on the Scottish government to:
- Speak out about the impact that the debt crisis is having on Zambia and call on the banks to cancel Zambia’s debt
- Call on the UK government to demand the banks participate in the G20s Common Framework, and protect countries like Zambia from being sued in court if they default on their debt.
You can find more about our campaign by: