Anti-debt group demands that the burden of debt on developing countries that amounts to over US$11 trillion should be cancelled in view of the COVID-19 pandemic.
Led by former Brazil president Dilma Rousseff, Socialist Party (Zambia) president Fred M’membe, Thomas Isaac (finance minister, Kerala, India), Yanis Varoufakis (former finance minister, Greece), Jorge Arreaza (foreign minister, Venezuela), Juan Grabois (frente Patria Grande, Argentina and Vijay Prashad (Tricontinental: Institute for Social Research), the group notes that every dollar in debt servicing that goes to repay a bank, or a wealthy bondholder is a dollar that can go to buy a ventilator or for emergency food support.
“By all accounts, developing country debt now stands at over US$11 trillion. In the remainder of 2020 itself, the debt servicing payments on this debt will amount to US$3.9 trillion. This debt has ballooned over the past several decades, leaving most developing countries in an unsustainable financial situation. Defaults and debt adjustments seem to be a permanent fixture amongst developing countries, coming punctually for reasons that are often external to the fundamentals of their economies. Austerity has become a permanent condition, which is what weakened the public health systems of so many countries and left them vulnerable to this global pandemic. To continue to service the debt and to be obliged by these debt burdens means that developing countries will not be able to efficiently and effectively tackle the pandemic, nor build the systems necessary for future public health emergencies,” the group argues. “Debt suspension or postponement does not provide a foundation for the necessary development of these countries. It merely puts off the reckoning. It is time for the cancellation of these odious debts, which cannot – in any case – be paid during the coronavirus recession. Both public and private creditors took a risk with their investments. They exploited the needs of developing countries by lending money with obscene interest rates; it is time that they paid the price for the risk that they took rather than force countries with meager resources to pay out precious capital.”
Last year, the German Development Institute warned that developing countries are facing a renewed debt crisis. The institute noted that, “High foreign debt hampers the development of these countries because the money has to be used for interest and principal payments and is not, therefore, available for key investments, such as infrastructure or social spending. Long-standing internal and external problems are again among the key causes of debt in low-income countries. However, the current situation differs significantly from previous debt crises. In particular, the creditors involved have mainly granted non-concessional loans and not concessional loans….”
And, like the anti-debt group, Commonwealth secretary-general Patricia Scotland observes that a lethal combination of disease, extreme climate events and economic crises is threatening the smallest and most vulnerable nations of the world.
“To tackle it, we must overhaul how we understand and address economic vulnerability. The COVID-19 pandemic has already triggered a massive global recession… with knock-on effects such as unprecedented levels of unemployment and disruption to social services…There is good reason to feel anxious. We hope to build a consensus among our members on the definition and measurement of vulnerability, to help us better understand the needs of countries in crisis and propose the best solutions. Without this altruistic approach to debt relief, many vulnerable countries are at a great risk of a debt crisis with alarming socio-economic impacts. We simply cannot afford to sit back and allow such a setback to human development,” says Scotland.
The devastating effects of COVID-19 are bare – we are seeing them, feeling and enduring them. As noted globally, efforts of the global community to deal with the financial impacts of the coronavirus pandemic, the nature and size of the support on offer, is simply not enough.
The global community must take this petition for debt cancellation seriously and urgently.
Cancel debt of developing countries.