How the Chancellor responded to the fight against coronavirus and debt

Thousands of us wrote to our MPs last month calling for debt cancellation for countries in the global south to help with the fight against coronavirus 

If you wrote to your MP, you likely received a response forwarded on from the ChancellorIn the blog below we help you unpack what they said line by line and explain why it’s not good enough.  

This autumn we have another chance to push for debt cancellation, let’s make sure we’re ready

Here’s the list of our demands, their response, and why we’re not stopping until they act. 

  • Demand: For the Chancellor to call for the cancellation of debts to the IMF and World Bank, which could be paid for by a combination of funds from a Special Drawing Rights issuance, gold sales, use of reserves, and donor grants.   

What the government said: “The multilateral development banks have committed to maintaining net positive flows to the world’s most vulnerable countries to supplement official efforts under the DSSI.”  

What this means: The government largely ignore the request to call for the cancellation of debt payments to the IMF and World Bank. “Maintaining net positive flows” means that the IMF and World Bank will lend more money this year than they receive in debt payments, but this just creates more debt in the future. We are calling for both the debt payments to be cancelled and additional money to be given as grants, so that countries have the resources they need to fight the coronavirus crisis.   

  • Demand: The Chancellor should push for the cancellation of and restructuring of debts to private lenders, rather than bailing-out those lenders with IMF loans.   

The government did not respond directly to this request.  

  • Demand: Introduce legislation here in the UK to prevent a lender suing a government for following the G20 Debt Service Suspension Initiative and suspending debt payments.  

The government did not respond directly to this request.  

What else did they say?  

The letter also raised several other points outside of the key asks, these are looked at below: 

  • Previous debt cancellation

What the government said: “The UK cancelled most of our low-income developing country debt under the Heavily Indebted Poor Countries (HIPC) Initiative since its inception in the 1990s.”  

This is largely true, though there are still some significant debts owed by a few countries. More importantly, by focusing on this in their answer, the government bypasses the fact that we are calling on them to help get debt owed to private and multilateral lenders cancelled (totaling $22.5bn in 2020 alone), these are t debts the UK has significant influence over.  

  • Transparency in lending  

What the government said: “The Chancellor has been working with borrowers and creditors to promote debt sustainability and transparency, including throughout the COVID-19 crisis.”  

Jubilee Debt Campaign has been campaigning for three years for new rules to require lenders to have to make loans to governments transparent. The UK government has refused to implement our suggestions for increasing transparency. Private lenders continue to be able to give loans in secret which are governed by UK law. And the UK government continues to give loans to developing country governments without immediately disclosing the existence of the loan, or ever disclosing key information such as the interest rate.  

  • IMF debt cancellation

What the government said: “The UK is contributing up to £150m to the IMF’s Catastrophe Containment and Relief Trust (CCRT) which is providing the world’s poorest countries relief on IMF repayments. The UK’s grant supported the IMF in agreeing to cancel debt payments for 25 eligible countries.” 

We welcomed the UK’s contribution which is helping to cancel some debt payments. However, the debt cancellation is only debt payments to the IMF for six months for 25 countries. In total it will save those 25 countries a maximum of $250 million. This is less than 2% of the $14 billion the 73 poorest countries are due to pay to multilateral lenders like the IMF and World Bank in 2020. In our requests above we both asked the UK to support cancellation of all these debt payments and suggested how it could be paid for. The government has ignored this request in its response.  

  • The debt suspension deal  

What the government said: “In April the Chancellor joined G20 counterparts to commit to suspend debt service payments from the world’s poorest countries for the duration of 2020. Through the G20 Debt Service Suspension Initiative (DSSI) official creditors will provide up to US$12bn of cash flow relief in 2020 to help countries respond to the health and economic impacts of COVID-19.”  

We welcomed the debt service suspension when it was announced in April. However, it is only on debt payments to other governments, not to private lenders and multilateral institutions. This is why we called on the Chancellor to take action so that it would apply to all lenders.   

Furthermore, the debt payments which are being suspended are still due to be paid between 2022 and 2024. This will create a bigger debt crisis in the future – payments need to be cancelled, not just suspended.  

 The response the government sent through is simply not good enough.  

We’ll keep on campaigning to make sure more debt is cancelled.

If you want to read more on what can be done you can download our new campaign toolkit 

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