Passing the buck on debt relief
Date: 16 July 2020
How the failure of the private sector to cancel debts is fueling a crisis across the developing world
This paper, produced in partnership with Oxfam, Christian Aid, Jubilee Debt Campaign and Citizens for Financial Justice and issued ahead of the G20 Finance Ministers meeting, shows that despite the DSSI, many of the poorest countries are spending more on servicing debt payments than they are on life-saving public services. This paper examines the size of the private debt burden in these countries and makes a case for the introduction of a mechanism that would make participation in a debt suspension initiative compulsory for all actors, including private and multi-lateral creditors.
We call on countries at the G20 financial ministers to take the following steps:
- Demand that private sector creditors and multi-lateral development banks immediately match the terms of the debt suspension offered by the DSSI under a binding and compulsory scheme.
- The agreed suspension needs to be extended until the end of 2022 and transformed into a future cancellation commitment.
- Pledge to pass legislation to remove the ability of hold-out bondholders to sue developing countries in courts for repayment on any debts they refuse to cancel.
This is particularly important in England and New York, under whose law the vast majority of international debts are owed. 4. Ensure a fair and transparent process for restructuring and further debt stock cancellation inclusive of all debt types and with the binding participation of all types of creditors, such as a global debt workout mechanism It is the duty of the international community to avoid adding a debt crisis to dozens of developing countries that are already dealing with health, humanitarian, hunger and economic crises. Preventing a global disaster demands widespread and concerted debt relief and significantly more financing.