Last weekend, the Group of 20, G20, held its summit in Riyadh, Saudi Arabia. Leaders from the world’s largest economies met virtually to discuss the global response to the Covid-19 pandemic, which has triggered the worst recession since the Second World War. The meeting followed the G20’s announcement of limp new proposals to address the looming debt crisis.
The economic fallout from the pandemic has pushed many countries with already unsustainable debt levels to the edge of debt default – where governments are unable to pay creditors back. Sovereign debt burdens have skyrocketed in recent years, reaching unprecedented levels prior to the pandemic.
For wealthier countries like the United Kingdom, current levels of borrowing and debt are not a problem – much of the UK’s debt is owed to itself or institutions within the UK and it can borrow at low interest rates. But countries in the Global South, where most debt is owed to foreign creditors, including multilateral institutions, private banks, investment funds and wealthy countries, are at much higher risk of default.
The current economic recession, with sharp currency devaluations, has plummeted these countries’ revenues at a time when public spending is more important than ever.
But calls for creditors to provide debt cancellation have been met with resistance from wealthy nations and private lenders. Instead, many countries in the Global South have been left with a stark choice: prioritise repayments at the expense of vital healthcare and emergency needs or risk default.
Over the last few years, the Zambian government has been required to cut spending to decrease its debt, even though it has one doctor for every 12,000 patients. Zambia has been spending four times more on debt payments than on public health throughout the pandemic.
Despite these measures, earlier this month Zambia became the latest in a string of countries this year to default on its debt. Private lenders rejected the government’s request for a temporary suspension of its debt payments and it simply could not afford to keep paying.
Buying time – at whose expense?
In April, the G20 launched the Debt Service Suspension Initiative (DSSI) to temporarily pause debt repayments. But the scheme only postpones repayment to 2022, when countries will likely have taken on even more debt to save lives amidst the pandemic.
Only a limited number of developing countries can participate in the standstill, while multilateral development banks, like the World Bank, and private creditors have refused to participate voluntarily.
According to the European Network for Debt and Development, $5.3 billion of debt payments have been suspended so far, but the 73 developing countries eligible for the scheme have continued paying a staggering $37 billion to private, multilateral and country creditors throughout 2020.
Ahead of the G20 Finance Ministers’ Meeting on 13 November, campaigners had hoped that leaders would announce a new framework that provided a solution to the crisis – in the form of debt cancellation and by including private creditors and multilateral lenders in the mix at the very least. But once again, it has disappointed.
Its ‘Common Framework for Debt Treatments’ stated that, “in principle, debt treatments will not be conducted in the form of debt write-off or cancellation,” though it did not rule this out. Instead it focused on tinkering with debt payment terms, such as increasing the time allowed for repayment.
While the new framework stipulated that countries asking for public debt relief will be required to seek relief from private creditors as part of the process, this places the onus on the countries themselves and does not stop private actors refusing their relief requests. Any debt relief given to developing countries from wealthy countries will likely still go straight into the pockets of their private creditor counterparts.
Meanwhile the G20 had only “meaningless words” to offer on multilateral debt cancellation, according to the Jubilee Debt Campaign. Within the G20, western countries have been dragging their heels on World Bank participation despite a concerted push from China.
This leaves no choice for countries but to continue to borrow from lenders, heaping more and more debt onto a mounting pile. When the due date comes for payment, it will hurt the marginalised the most.
Debt injustice is a women’s rights issue
The impacts of the Covid-19 pandemic have been swift, unequal and gendered. As schools closed and national lockdowns shut down access to essential services, women were left to fill the gaps in childcare and care for sick family members. Women and girls’ unpaid and underpaid care and domestic work, long exploited, has ballooned during the pandemic but still remains largely unrecognised.
Women, particularly in the Global South, are bearing the brunt of the economic damage from the pandemic and a jobs crisis which has hit the retail, hospitality and tourism sectors hardest. Women are more likely to have lost their jobs and less likely to have access to vital social protection like sick leave.
As shown by Zambia, when governments are forced to spend more revenue on debt repayment, it is often crucial public services, like health, education and childcare or social protection that get cut first. This has knock-on effect on women’s access to vital services, further increasing unpaid care work and impacting women’s employment in the public sector.
In 2018, women’s rights activist and director of policy and communications at Womankind Worldwide Dinah Musindarwezo warned, “The costs of servicing this debt are disproportionately borne by women, while the funds borrowed are rarely spent in ways that prioritise women’s rights.”
The G20’s new framework requires that countries looking to access debt relief must apply for an IMF loan programme. These programmes are known for imposing brutal austerity measures to cut deficits which exacerbate gender inequality. Ecuador is facing further public sector cuts as part of its debt restructuring process following years of severe austerity which prompted protests from indigenous women’s groups last year.
No wonder then that women’s movements have been calling for a ‘feminist bailout’ and feminists in Chile, Argentina, Spain and Puerto Rico have been striking against debt. This year marks 25 years since the adoption of the most progressive blueprint for achieving women’s rights at the Beijing conference. But the United Nations has warned that the pandemic will likely set women’s rights back by decades. Without action on debt justice to address debt crises now and in the future, this will be a shameful legacy of the pandemic.
This article owes debt of gratitude to Iolanda Fresnillo from the European Network for Debt and Development who offered her time and insights on this piece.