As noted by over 550 civil society organisations in an open letter in October 2020, the “indebtedness” of countries of the South is both a consequence and a tool for domination. A systemic analysis of the debt crisis needs to account for the fact that peoples of countries in the Global South have paid for the debts incurred in their name so many times over – with their money, their livelihoods, their safety, well-being, their lives, and the health of the planet. And all these in contrast to the much greater social, historical and ecological debt owed to the people of the South through centuries of colonial and post-colonial plunder and extraction of their natural resources and exploitation of their labor, including women’s unpaid domestic and care work.
Against this background, the false solutions of the G20 and International Financial Institutions (IFIs) to the debt crises in the Global South is resulting in a further bleeding of vital resources. A large number of countries in the developing world are already allocating more resources to debt service than to either public health care or education. The reform of the international debt architecture is urgently needed to ensure a systemic response to the debt crises.
A fair and timely resolution will never result from lender dominated forums, that excludes the voices of people and governments of the Global South. United Nations, which is not a creditor itself, is the only forum that provides an inclusive and democratic space to provide a lasting multilateral solution to the debt crisis.
At the upcoming UN General Assembly, governments should introduce a resolution deciding to establish an open-ended intergovernmental working group to work towards a binding and multilateral framework for debt crisis prevention and resolution. This could build on the earlier Resolution A/RES/69/319 adopted by the General Assembly where it was decided to further define modalities to consider improved approaches to restructuring sovereign debt, taking into account the Basic Principles on Sovereign Debt Restructuring Processes.
Such a binding, multilateral framework should urgently address:
- Supporting and providing immediate debt cancellation: Debt sustainability consistent with the SDGs and human rights can be achieved through extensive debt cancellation. Debt cancellation must be granted to all countries in need, including to both low- and middle- income countries, assessed with respect to their development financing requirements, and provided by all creditors (bilateral, multilateral and private).
- Building global consensus on Principles on Responsible Borrowing and Lending: Long- pending issue of agreeing on common and binding principles on responsible borrowing and lending, and ensuring compliance with it. This should address the gaps in transparency and advance towards the creation of a publicly accessible registry of loan and debt data as well as facilitate the organisation of debt audits.
- Using human rights and development impact assessments in debt sustainability analyses to widen their focus solely from economic considerations to consider also the impact of a country’s debt burden on its ability to meet development goals (including SDGs, climate goals, human rights and gender equality commitments) and create the conditions for the realisation of all universal human rights.
- Assessing systemic risks posed by unregulated or inadequately regulated financial sector instruments and actors: including regulation and supervision of the asset management industry (shadow banking), regulation and supervision of Credit Rating Agencies and a new global consensus on the critical importance of capital account management beyond pre/post crises conditions, both with respect to inflows and outflows. The CS FfD Group’s detailed submission to the UN Independent Expert on poverty and human rights on the ‘role of credit rating agencies’ can be accessed here.
Beyond the establishment of a multilateral debt resolution framework, we need to urgently implement substantial reforms in the financial system, including further regulation of the financial sector. We believe that the organisation of the next UN Summit on Financing for Development would be key to advance the systemic and urgent reforms of the global financial architecture.