The IMF and the World Bank (IMF-WB) hold their Spring Meetings amidst an ever-worsening debt crisis, most harshly felt by 3.3 billion people living under governments that spend more on interest payments than education or health.
For many decades until today, the IMF-WB, with the backing of rich countries, have been at the forefront of shaping an international financial architecture that systematically enables the transfer of wealth to the North, perpetuating a deepening cycle of indebtedness, poverty, inequality and environmental degradation in Global South countries.
Today, these international financial institutions continue to persist in pushing loans as the solution to crises. At the height of the COVID-19 pandemic, when financial resources were most urgently needed, they supported and promoted the debt relief schemes of the G20 and Paris Club that merely postponed debt payments. These have all but proven flawed and futile. The suspended payments fall due in 2025, by which time debt accumulation will have sped up even more. Private and commercial lenders, who now hold over 60% of sovereign debt, remain free to refuse participation in debt reduction.
Total public debt, domestic and external, reached $92 trillion in 2022, increasing five-fold since 2000. Southern governments account for almost one-third of the total debt and are accumulating debt much faster than their richer counterparts. The number of countries with public debt levels exceeding 60% of GDP continues to rise, from 22 in 2011 to 59 in 2022. Long-term public external debts alone of low- and middle-income countries, excluding China, amount to a staggering $3.3 trillion.
The IMF and the WB consistently prioritize the interests of creditors, commercial banks and other profit-driven institutions while stripping the Global South of public money for essential social services and the fulfillment of their rights. These anti-people loyalties have grown even more marked as the IMF and WB chime in with rich countries in pushing loans for climate action, knowing fully well that Global South countries are unjustly being made to pay for a climate emergency they did not cause.
Debt service payments siphon much-needed resources from public coffers. On average, debt service eats up 35% of budget revenue across 139 WB-borrowing countries, a share that rises significantly among low- and lower-middle-income countries (LIC and LMIC) to 57.5% and 44.5%, respectively. Global South countries also allocate more funds for debt service, by 65% in LICs and 14% in LMICs, than the combined budgetary spending for education, health, and social protection. Low- and middle-income countries totaled US$443.5 billion in 2022, already the highest level in history. This will have increased by 10% this year compared to the previous two years by the WB’s own estimates.
No less harmful than the IFIs’ lending practices are loan conditionalities that shape government policies, programs and activities along neoliberal lines. These typically consist of austerity measures from capping public sector wage caps and removing food and fuel subsidies to cutting social spending and privatizing public assets, including those providing essential services.
The World Bank has yet to account for loans that are clearly illegitimate and must be canceled outright, without any condition. Large-scale infrastructure projects financed by WB led to displacement of communities, loss of livelihoods and destruction of ecosystems, and in the process, deepened inequality and impoverishment. It has never owned up to climate-worsening fossil fuel subsidies and project loans, which oftentimes hit communities already struggling to survive economic hardships and environmental degradation. It also continues to subsidize the fossil fuel industry through direct and indirect financing, estimated at $885 million in 2022 and at least $194 million in 2023.
The consequences of WB projects, coupled with IMF neoliberal policies have been devastating for vulnerable communities in the Global South. Indigenous peoples, rural communities, and marginalized populations have borne the brunt of environmental degradation and climate change impacts, despite contributing the least to the problem.
APMDD asserts the illegitimacy of these loans, some of which have been paid fully over the decades despite their harmful impact on people and communities now and in the future. It is time for the IMF and the WB to be held accountable for their historical role in exacerbating systemic debt and climate crises. We demand reparations from the IMF and the WB for their role in exacerbating systemic debt and climate crises, starting with –
- Unconditional and immediate debt cancellation, especially of illegitimate debts that include debts from fossil fuels.
- A stop to fossil fuel lending
- An end to pushing loans for climate action
Cancel the Debt!
Cancel debts from fossil fuel projects!
No to loans as climate finance!
Grants, not loans for climate action!
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