UNSUSTAINABLE and ILLEGITIMATE DEBT
COVID19 brought staggering challenges to survival to people everywhere, most of whom have already been dealing with economic precariousness, impacts of an escalating climate crisis, and violence in many forms. This is especially true for women, for people of color, for indigenous peoples, migrants, farmers, workers and others who have had to grapple with additional layers of discrmination and marginalization.
Massive mobilization of finance on an unprecedented scale, much more than that has been mobilized so far, is so desperately needed. It is needed not only for peoples’ survival but to undertake a profound transformation of the system to solve the multiple crises we are facing. We fight for these financial resources on many crucial fronts.
One is on the strengthening and broadening of the global debt movement to demand unconditional debt cancelation by all lenders for all developing countries and changes in international and national economic and financial unequal relations, flawed frameworks and unjust policies to break the vicious cycle of indebtedness.
The responses of the international financial institutions, the G20 and all other lenders to the debt problem, in the wake of COVID, has been so pathetic. The four tranches approved by the IMF thus far, the latest one just last month, for debt payments cancellation for less than 30 countries, has only amounted to US$802 million, a drop in the bucket compared to close to US$400 billion annual external public debt payments of low and middle income countries.
The Debt Service Suspension Initiative of the G20 which ends this December, amounts thus far to only US$5 billion worth of suspended debt payments since May 2020 for more than just 40 out of 73 eligible countries. Not only have these debt relief initiatives failed to deliver what is needed, fiscal responses to the COVID pandemic are going to leave the global south with much worse debt problems. Lending during COVID has risen by 30 percent.
We demand debt cancellation as a matter of justice to address unsustainable debt but also illegitimate debt, and we urge movements to reassert the issue of illegitimate debt again as part of a broader effort to counter; debunk and resist the flawed and narrow assumptions and frameworks of lenders on what it means to be in a debt crisis, which for them it is just about our ability to pay back the debt; and what are just and enduring solutions.
Another important arena is our campaign to demand the full delivery of climate finance obligations by wealthy countries, or developed countries as they are called under the UN Framework Convention on Climate Change. This obligation is based on developed countries' huge share of historical and continuing responsibility for the climate crisis. Climate finance is not aid or assistance; it is owed to all peoples and communities of the global south to cover adaptation as well as loss and damage costs in the south, and is also part of the wealthy nations’ share of mitigation actions. Their historical and continuing emissions are so huge that it is not enough for them to reach real zero emissions domestically. They have to fulfill the rest of their fare share by financing more mitigation actions to be carried out in the south.
In 2009, rich countries promised to raise US$100 billion annually by 2020, and thus far they have failed. The COP26 Glasgow Pact merely urged countries to double their climate funding by 2025. But based on current contributions, doubling these contributions will not even reach US$100 billion. The US$100 billion is actually just a small fraction of the climate finance obligations. According to UNFCCC’s own standing committee on finance, the climate finance needs of developing countries amount to trillions of US dollars.
Wealthy countries actually spend many more times of this amount in public subsidies for fossil fuels. For example, the G7 governments spent a combined total of US$200 billion on fossil fuels in 15 months since January 2020 whereas their climate finance pledges to the UNFCCC financial mechanism since 2001, in the last 20 years, amounted to only US$23.7 billion so we all know where their priorities lie.
We are of course also fighting the flaws and inequities of national and global tax systems and illicit financial flows. This is a critical fight not only to raise more resources for public services, for climate action and for social justice programs; it is also a fight to reduce tax burdens and biases against workers, the poor, women, and to stop the tax abuses of multinational corporations many of which already cause other major problems in our economies. Right now, we are in the middle of a fight against the OECD-G7-G20 Tax Deal which favors multinational corporations and elites. A minimum corporate tax rate of 15 percent is well below the average corporate tax rate in Africa and Asia. Further, the formula for the allocation of tax revenues favors wealthy countries over the global south.
Together, we are not short of clear policy and structural alternatives and proposals for both immediate reforms and strategic changes not just on these finance issues but on many other related fronts like trade, but what we need to work more is our power, our strategies and our actual efforts.
A most critical lesson from the climate crisis is that we do not have much time. Whatever we have been doing to build power and to fight for immediate as well as strategic changes, have to be scaled up in scope, intensity and speed. As we challenge our governments to shift away from ‘business as usual’ and be swift and ambitious in their climate actions, we must also challenge ourselves, our organizations and our movements to be more bold, daring, ambitious and work harder and faster for social change. This involves changing the balance of power, the relations of power, as part of the realities we face is that those in power today are the very ones who benefit from the system we seek to change.
*Delivered at the opening webinar of the Eurodad Policy Forum, “"The Covid-19 Crisis: Portal or Dead End?", 22 November 2021. For the full webinar, watch it in Eurodadvideos, at https://www.youtube.com/watch?v=A5tF9TUHSpI.
PRESS RELEASE
G20, World Bank-IMF, private lenders slammed for debt-creating, self-serving debt solutions
Drum-beating calls for debt cancellation, Asian groups stressed greater burdens on people and planet in the wake of the urgency of public funding for essential services, failed business-as-usual debt solutions, vaccine inequities, economic downturns and the climate crisis
Manila, 28 October 2021— Calls for debt cancellation rang out from several Asian cities as members of the Asian Peoples’ Movement on Debt and Development (APMDD) marched on the streets today demanding that public funds go to people’s needs, and not debt service.
“The need to speak out is stronger and more urgent than ever, especially since the solutions imposed upon us by these lenders are leading us to deeper debt, poverty and inequality,” APMDD Coordinator Lidy Nacpil said.
APMDD and its members organized the coordinated activities as part of the Global Days of Action for Justice and Debt Cancellation from Oct. 14-30, an initiative supported by debt justice movements from around the world.
She noted the temporary and very limited debt suspension measures that end this year for low-income countries and the failure to address equally dire conditions in middle-income countries. “The backlash of resuming debt servicing will be severe. Add to that the payment of both old and news debts with the huge increase of lending since the global COVID pandemic began. There can be no genuine move towards rebuilding from the pandemic and the multiple crises without cancelling debt and freeing up financial resources for people’s survival.”
Leody de Guzman, Chairperson of the Bukluran ng Manggagawang Pilipino, asserted debt cancellation as a vital step towards a just socio-economic recovery and rebuilding. “We have long demanded the cancellation of debts, much of which is illegitimate for having enriched politicians, destroyed the environment and eroded local livelihoods.”
The Freedom from Debt Coalition pointed out the Automatic Appropriations Law, a Marcos legacy that holds to this day which prioritizes debt service in the budget, regardless of people’s needs. Coalition president Dr. Rene Ofreneo scored the law as “patently unjust when public money is urgently needed for adequate, sustained and long-term solutions to the multiple crises”. He added that “it must immediately be scrapped to shift people’s money into vaccines and public health, job creation and climate resilience.”
Secretary General of the national women’s movement, Oriang, Oyette Zacate highlighted debt cancellation as key to fulfilling women’s rights. “Women pay with their unpaid labor, when the government fails to amply finance public health systems because it puts debt service first before people and rights. Cancelling the debt can unlock public funds needed for the government to fulfill its obligation under the Magna Carta of Women to realize women’s rights.”
Manjette Lopez, president of the party-list organization SANLAKAS, said that “it’s high time to move away from business-as-usual and trickle-down economics approaches debunked by the pandemic ''. Instead of bailing out corporations and private lenders, “public money must fund a people’s stimulus where jobs are created, direct income support for affected individuals and households are given, and the budget for health doubled to re-build and strengthen the public health care system, particularly community-based primary health care.”
In other Asian cities, from Lahore, Farooq Tariq, General Secretary of the Pakistan Kissan Rabita Committee, scored the adverse impact of debt on social spending. “Where is the money for public services? Nearly half of our people live below the poverty line and about 70% have not yet been vaccinated against COVID19. Yet over $1 billion per month will be claimed from us in external debt payments until June 2023.” He noted the temporary debt suspension measures that end this year for low-income countries and the failure to address equally dire conditions in middle-income countries. “When the temporary debt suspension ends in December this year, we will feel the severe backlash of resuming debt servicing on top of new debts that the Pakistan government has incurred. Debt cancellation will unlock funds that should be used to raise urgently needed resources for people’s survival.”
In Karachi, other APMDD members scored the “perfect debt trap” of Pakistan. Saeed Baloch, Secretary General of the Pakistan Fisherfolk Forum (PFF) said: “We are trapped in debt servicing while ordinary working people are barely surviving. This has to change because lives are on the line. Debt cancellation is what we urgently need.” Baloch noted the temporary debt suspension measures that end this year for low-income countries and the failure to address equally dire conditions in middle-income countries.
In the Nepal capital of Kathmandu, Abishek Shrestha of the Digo Bikas Institute decried the limited debt suspension of the G20 that his country applied for. “What will happen in 2022, when we are obliged to return to servicing external debts? We have also incurred new debts that will likely bind us to social spending cuts at a time when our people need public health and social services.”
In Indonesia, Muhammad Reza Sahib of the People’s Coalition for the Right to Water (KRuHA) underscored the impact of debt and neoliberal policies pushed by the G20 and international financial institutions on local communities. “Indonesia, like other countries of the Global South, is trapped in the never-ending cycle of debt and water injustice, and this has all to do with the wholesale acceptance by our governments of the neoliberal policies championed by the G20, World Bank and IMF. Water privatization has led to the neglect of public systems and infrastructure and made us more vulnerable to COVID-19 so we say no more to these injustices, we do not owe these loans, and we should not pay them.”
For more information:
Mae Buenaventura
Phone: +63 917 560 8096
Bruce Amoroto
Phone: +63 939 377 9312
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