New calculations released by anti-poverty campaigners Debt Justice today show that G7 countries are responsible for 51% of external debt payments by lower income countries. On the same basis, China is responsible for 14% of payments. G7 Finance Ministers will meet in Bonn, Germany, this week from 18-20 May.
The calculations are based on the facts that many debts owed to private lenders are governed by English or New York law, many private lenders are based in G7 countries, and G7 countries hold large shareholdings in multilateral institutions such as the IMF and World Bank, which are themselves recipients of a large proportion of debt payments.
The G7 Finance Ministers meeting this week will discuss how to respond to the wave of debt crises in lower income countries.
Campaigners are calling on the G7 to unblock international negotiations on debt relief by making private lenders cancel debts. IMF Managing Director Kristalina Georgieva has called on the UK and US to pass legislation to stop private lenders blocking debt relief agreements. President of the World Bank David Malpass has made similar calls.
Tim Jones, Head of Policy at Debt Justice, said:
“Loans to banks, hedge funds and oil traders are a far bigger problem for lower income countries than debts owed to China. The G7 must take responsibility for debts governed by their laws and owed to their companies and urgently agree new means to compel private lenders to cancel debts.”
Isaac Mwaipopo, a member of the Zambia Civil Society Debt Alliance, and Executive Director of the Centre for Trade Policy and Development in Zambia, said:
“Zambia urgently needs debt cancellation to cope with food price increases, and to recover from the economic crisis and pandemic. Yet 15 months after applying for debt relief, nothing has happened. The G7 must make sure debts governed by English law, and owed to companies in G7 countries, are included in the debt cancellation we urgently need.”
The calculations of G7 responsibility are for 82 countries with a GDP per person of less than $4,095 a year (£3,250), classed as low or lower middle income by the World Bank.
The overall figures for G7 responsibility for debts are replicated in countries in debt crisis. Of three countries which have applied for the G20’s new debt relief scheme, and a further seven in default or at high risk of being so, the G7 are responsible for 54% of their debt payments on average. By contrast, China is responsible for 18%. These ten countries include Zambia, which is in default and has applied for debt relief, Sri Lanka which has just entered default, and Ukraine, where private lenders have been selling debts at less than 50% of their face value.
 For the full calculations see Debt Justice’s briefing ‘G7 responsibility for debt crises in lower income countries’
 “We also are pressing for some of the changes, legal changes that need to happen in New York, in London, to close loopholes for vulture funds and others to prevent debt resolution. We are discussing how we can bring more contingency measures in debt agreements, how to press for more debt transparency.” https://www.imf.org/en/News/Articles/2022/04/21/tr220421-transcript-of-the-imfc-press-briefing
 “Given the depth of the pandemic, I believe we need to move with urgency to provide a meaningful reduction in the stock of debt for countries in debt distress. Under the current system, however, each country, no matter how poor, may have to fight it out with each creditor. Creditors are usually better financed with the highest paid lawyers representing them, often in U.S. and UK courts that make debt restructurings difficult. It is surely possible that these countries—two of the biggest contributors to development—can do more to reconcile their public policies toward the poorest countries and their laws protecting the rights of creditors to demand repayments from these countries.” https://www.worldbank.org/en/news/speech/2020/10/05/reversing-the-inequality-pandemic-speech-by-world-bank-group-president-david-malpass