G20: Preventing a debt crisis
10 July 2020
On 18 July, the G20 group of the world’s largest economies will meet to discuss pressing global issues. They will have an opportunity to make sure that global institutions act fast and avoid coronavirus causing lasting damage to the world’s poorest people.
A looming debt crisis
Across the world, low and middle-income countries are not only dealing with coronavirus, they are also facing unimaginable financial hardship and a looming debt crisis.
Before we had even heard of coronavirus, 34 countries were already in debt default or at high risk of being so, and 64 developing countries were spending more on debt payment than they were on healthcare.
The coronavirus pandemic is causing a global economic slowdown. For developing nations, the financial outlook is only set to get worse in the months and years ahead as:
- the price of raw materials collapses
- demand for exports declines
- remittances are scaled back.
The IMF is now warning that African countries face the worst economic shock since the 1970s.
July G20 meeting
On 18 July, finance minsters from the world's richest countries, known as the G20, will meet to discuss the pressing issues of the day. A key decision to be discussed will be how to respond to this crisis.
These finance ministers must use this meeting to agree to cancel debt payments for countries who urgently need it. The last time the G20 finance ministers met in April they agreed to suspend debt payments due to other governments in 2020 from the 77 poorest nations – saving an estimated $12 billion.
But we are urging the G20 to now go further. Suspending rather than cancelling debt only provides a temporary solution. Without further action, countries will face an even bigger debt crisis next year. Furthermore, in focusing only on bilateral loans to other governments, the G20 debt relief fails to address the debt owed to private lenders or to multilateral banks.
The Symposium of Bishops Conferences of Africa and Madagascar (SECAM) has recently called for further action on debt, saying: “Undoubtedly, initiatives have already been taken in the management of the impact of the pandemic, but we would like to go further to plead for the massive cancellation of debts of African countries, to enable them to revive their economies.”
Similarly, Pope Francis has spoken out on the injustice of debt, saying: “It cannot be expected that the debts which have been contracted should be paid at the price of unbearable sacrifices. In such cases it is necessary to find … ways to lighten, defer or even cancel the debt.”
Cancel debt now
We are calling on the UK Chancellor of the Exchequer to work with his counterparts at July’s G20 Finance Ministers' meeting. He must ensure debts are cancelled for all countries that need it, until at least the end of 2021. The finance ministers must also take steps now to avoid a future debt crisis.
Cancelling the debt will allow developing countries to care for people affected and to help their economies to recover in a way which protects, rather than damages, our common home.