It’s been a huge week for debt campaigning.
Following calls from over 200 organisations and 750,000 people around the world for debt cancellation to help lower-income countries cope with coronavirus, this week we had announcements from the G20 and the IMF. Over $12billion in debt payment suspension has been announced for this year, but there’s still a long way to go.
What just happened?
Debts can be either bilateral, lent from one country to another, multilateral, lent by a big international body like the IMF or the World Bank, or from private lenders – usually banks or hedge funds. This week we saw debt suspension or cancellation from both international lenders and individual countries as well as some announcements from private lenders.
On Monday we heard that the International Monetary Fund (IMF), the body that lends to countries in temporary crisis will cancel $215 million of debt payments for 25 countries over the next six months due to the coronavirus pandemic. This is a group of some of the poorest countries and includes Sierra Leone and Liberia.
This is good news. However, it’s a drop in the ocean compared to the total amounts of debt cancellation that’s needed. Jubilee Debt Campaign estimates that debt cancellation of up to $300 billion is needed by middle- and low-income countries to help fight coronavirus over the next year.
Later in the week, both the G20 finance ministers announced they will suspend debt payments for the rest of the year for 77 countries, which is estimated to save $12 billion. They also called on private lenders to do the same, which would save $8 billion.
These are all positive steps forward and help to keep vital resources in countries where it is needed now, but we know much more needs to be done.
What comes next?
Although a lot has happened this week, we have to keep up the pressure and make sure there are real structural changes made so debt crises don’t continue. Coronavirus has exposed the economic fragility of countries that carry high levels of unfair debts.
We need to see real debt cancellation, not just suspension – which just lays the ground for an even bigger debt crisis in the future – and for a permanent debt work-out mechanism at the UN to be introduced. We also need to make sure debts to private lenders are properly regulated. Right now, if countries don’t pay up there’s nothing to stop private lenders suing poor country governments in UK or New York courts.
We need legislation to make sure this doesn’t happen.
Countries shouldn’t have to choose between paying debts and funding healthcare. These are positive steps forward, but much more needs to be done.