Despite the clear need for more debt cancellation the G20 finance ministers failed this week to act.
$2.8 billion dollars are spent on debt payments a month by the world’s poorest counties, and right now the pandemic is spreading in the global south. Cases continue to increase across Africa, Bangladesh has 200,000 cases and rising, and El Salvador’s health system is close to collapse.
The Finance Ministers of the world’s richest countries met this weekend, ostensibly to agree what to do about the crisis, but not only did they fail to agree any new measures, they weakened what they’d already put in place.
What just happened?
Back in April the G20 introduced the Debt Service Suspension Initiative (DSSI). This allowed up to 73 countries to apply for debt repayments to be suspended for 2020. The initiative only covers bilateral debts (country to country) but the G20 suggested a similar mechanism for multilateral lenders (like the world bank and IMF), and private lenders (like banks and hedge funds).
This debt suspension did not address the structural issues regarding debt, it only, as Jubilee Debt Campaign Director Sarah-Jayne Clifton said, ‘Kicked the can down the road’. The debts will have to be paid after 2022, leaving many countries in more debt, for longer.
This July the G20 met again. More than 800,000 people signed petitions, shared information, wrote to their MPs with a clear and straightforward message:
Drop Debt. Save Lives.
Our demands are simple:
- Cancellation of debt payments;
- Create measures to require private lenders and multilateral institutions to take part in any suspension or cancellation; and
- Debt payment cancellation to be extended for several years, until an international debt workout process has been established in order to bring debt down to sustainable levels.
Despite all of this, the G20 Finance Ministers failed to build on commitments made earlier this year where they pledged up to $12 billion in debt suspension. They failed to extend this to next year, and they failed to agree further cancellation in the face of the increasing spread of the virus.
The G20 have no longer called on multilateral lenders to suspend debt payments, as they previously did in April. They now “strongly encourage[d] private creditors to participate in the DSSI on comparable terms when requested by eligible countries”, but they have not announced any mechanisms to make private lenders comply.
Debt payments are crippling the pandemic response.
Currently, $92 million dollars a day is spent on debt repayment rather than saving lives in the middle of a global pandemic. The G20 must act.
The World Bank says the suspension of payments to other governments could save up to $11.5 billion in 2020 for 73 countries, though the G20 have said only $5.3 billion is being suspended so far. Those same 73 countries are due to pay private and multilateral lenders $19.9 billion over the same time period.
In the autumn world leaders are meeting again. When they do, we have to make sure they get the message that if countries in the global south are going to be able to fight this pandemic there must be more debt cancellation.