Debt cancellation is vital for global recovery
By Claudia Webbe MP
Cancelling debt for poor countries is desperately needed to shore up public health systems, social protections and address global structural inequality writes Claudia Webbe MP
The global Black Lives Matter movement has drawn attention to systemic inequalities in our economy and society in the UK, the United States and across the world. This structural inequality means the poorest countries – overwhelmingly former colonies – are tied into exploitative relationships with the richest countries.
One mechanism through which these exploitative relationships are both exemplified and reinforced is through the debt the poorest countries have been saddled with.
This has historically taken the form of the International Monetary Fund (IMF) or World Bank tying loans to the implementation of ‘structural adjustment’ measures (often what we would recognise as austerity), as happened in Ecuador last year for example.
Other countries have been stuck in ‘debt traps’ – meaning they have to borrow more money just to service growing debt burdens, at the expense of lives, livelihoods and wellbeing – for much of the time since they stopped formally being colonies.
Even before the coronavirus pandemic hit, 64 countries spent more in servicing their external debts – including to richer countries, multilateral organizations such as the IMF, and private lenders – than they did on the healthcare of their own people.
Red Pepper – Big Solar Summer 23
Red Pepper – EPC July-Sept 23
The ten countries with the biggest difference between the proportion of government revenue spent on healthcare and external debt payments were Angola, Sri Lanka, The Gambia, Republic of Congo, Ghana, Zambia, Laos, Lebanon, Pakistan and Cameroon. Astonishingly, these ten all spent over 20% of government revenue on external debt payments in 2019. It is simply indefensible that some of the poorest countries are having to spend more money on debt payments than meeting the basic health needs of their people.
Global action
For this and many other reasons, I was proud to join more than 300 lawmakers from around the world based in over two dozen nations in recently calling on political leaders and global financial organizations—including the IMF and World Bank—to cancel poor nations’ debt as they work to combat the coronavirus crisis.
With reference to the 70 International Development Association (IDA) countries, the letter calls ‘on all G20 leaders through these [international financial institutions] to support the cancellation of debt obligations held by all IDA countries during this unprecedented pandemic.’
It adds that ‘the vulnerable communities that lack the resources and privileges to adopt adequate public health measures will ultimately face the disproportionate burden of coronavirus’. The letter was initiated by US lawmakers Ilhan Omar and Bernie Sanders. As Congresswoman Omar said, ‘We as a global community must seize this opportunity to get relief to those who are suffering by cancelling debt for nations who cannot afford it’.
Whilst the recent IMF announcement of temporary debt relief funding for 25 poorer member countries is an encouraging development, much more widespread action is still needed. It is therefore vitally important that progressives around the world demand debt cancellation. This means moving beyond recently agreed measures of temporary suspension of payments.
Economic solidarity
Committing to debt cancellation is a fast way to enable countries to have the financing desperately needed to shore up public health systems and social protection in the face of the Covid-19 crisis. It would also mean more resources for the extraordinary challenges of reconstruction.
As Bernie Sanders said, without sweeping debt relief, poor nations could be forced to ‘dedicate money that should be going towards protecting the health and safety of their people to pay off unsustainable debts’.
Countries that cannot adopt adequate public health measures will face the heaviest burden of coronavirus. We must not stand by and allow these countries to be without the resources desperately needed to purchase medicine, protective equipment, food, and much more besides.
The stark reality is that without cancellation, hundreds of millions of people around the world could face an unprecedented economic collapse. There would inevitably be an accompanying humanitarian crisis, with unimaginable increases in poverty, hunger, and associated diseases. These would only further burden already underfunded healthcare systems.
An end to business as usual
The coronavirus crisis has shown just how interdependent we are on each other, both here in Britain and across the world. As well as the humanitarian imperative to cancel debt, this means that, in today’s globally connected economy, if cancellation does not happen people here in Britain will also feel the effects. The British economy – although one of the largest economies in the world – doesn’t exist in a vacuum. Failure to tackle the international debt issue will lead to many countries in the Global South entering deep recessions, greatly harming the global economy and chances of recovery.
On the other hand, cancelling debt would contribute to global economic recovery. As the letter argues, as ‘an international community, we can only begin to move past this pandemic once this pandemic ends for everyone’.
The Black Lives Matter movement is showing the anger at injustice, and demanding real change and equality on a global scale. Exploitative relationships based on the days of colonialism must end.
At the IMF for example, there are 189 member countries, but the US and its allies in richer countries, including the UK, have always had a majority of decision-making votes. We should argue that the UK utilises its position and advocates for debt cancellation in this forum, while urging the US to do the same. Indeed the same applies to the World Bank where the UK remains a major shareholder. The opportunity should also be taken to put forward the case that the very nature of the international economy needs to change.
We must ensure that after the economic, social and health devastation of the Covid-19 crisis – and the global crises of inequality and climate change that preceded it – there is no return to business as usual. Disgracefully, the Conservatives are more interested in scrapping the Department for International Development than they are in creating a more equitable global economy. Just like their main ally Trump, they seem to have nothing but contempt for the Global South.
Now is the time to build a different, better world. Now is the time for the world to act as a global community. It is time to put people and public health first.
Claudia Webbe MP is the member of Parliament for Leicester East. You can follow her at www.facebook.com/claudiaforLE and twitter.com/ClaudiaWebbe
