Banks and hedge funds slammed for draining poorer countries of funds during pandemic

Banks and hedge funds slammed for draining poorer countries of funds during pandemic

Date: 14 October 2020

  • $13 billion to be paid by lower income countries to rich creditors by end 2020

  • Campaigners call for urgent reforms to a debt system which puts profits ahead of lives

Some of the world’s richest investment banks and hedge funds are draining developing countries of urgently needed funds to deal with the coronavirus crisis, says a new report from a coalition of charities and campaign groups.

As the G20 finance ministers and the IMF meet this week, the report shows how financial corporations like Blackrock, HSBC and Goldman Sachs have become huge players in the world of sovereign debt, with multi-trillion dollar asset manager Blackrock alone holding close to US$1 billion of bond debt in Ghana, Kenya, Nigeria, Senegal and Zambia. Blackrock’s assets are worth 2.5 times more than the GDP of the entire African continent.

Nearly one-third of lower income country debt is owed to private creditors, but the proportion varies across countries, with 69% of all 2020 debt payments due in Zambia owed to private creditors and 59% in Ghana. In total, $13 billion in debt service payments from these countries to private creditors are due between the start of May and the end of 2020.

While some debt relief has been agreed by G20 countries, this does not encompass debts owed to these private companies, even though their debts tend to carry higher interest rates. Countries like Zambia have already requested relief from private creditors, but their proposal has been turned down, highlighting the enormous power of private creditors in the debt system. Perversely, this means debt relief agreed by rich countries is being diverted into the pockets of some of the richest investors in the world.

Issued by Global Justice Now, CAFOD, Christian Aid, Jubilee Debt Campaign and Oxfam, the report calls for urgent reform of the debt system, which the groups label opaque, complex and heavily weighted in favour of big financial corporations. They are calling for private sector creditors to be compelled to write down developing country debts, and for a new international mechanism that would allow for fair, speedy and comprehensive debt restructurings.

Nick Dearden of Global Justice Now said:

“It is nothing short of obscene for the richest banks in the world to continue collecting debts from the poorest countries in the world, in the middle of one of the worst economic and health crises in living memory. While countries across Africa, Asia and Latin America urgently need to scale up spending which supports public healthcare and the livelihoods of their citizens, they are instead forced to fill the coffers of multi-trillion dollar investment funds.

“Today we are demanding that world leaders compel these private lenders to write down debts. But we must go further. While coronavirus has made the crisis acute, the problems are built into a debt system which punishes the most impoverished people in developing countries for the reckless behaviour of the world’s richest banks. Urgent and radical reform of the debt system is the only way to stop a lost decade of impoverishment.”


Under the radar: Private sector debt and coronavirus in developing countries can be downloaded at:

Photo: Michael Vi/Shutterstock