Debt management, sustainability and justice

The problem

A global south debt crisis is no longer a risk but a very tangible reality. Increasing debt payments are crippling the governments’ ability to provide essential public services and tackle the climate crisis in many countries. Debt service, including both domestic and external debt payments, is absorbing an average 38 per cent of budget revenue and 30 per cent of spending across the South, rising to 54 per cent of revenue and 40 per cent of spending in Africa, according to a Debt Service Watch report. These figures are more than twice the levels faced by low-income countries before the Highly Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). Therefore, this is already the worst debt crisis the world has ever seen.

For more information, see the summary report.

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In front of this reality, affecting people’s wellbeing and rights every day, international financial institutions are looking at the structural sovereign debt problems that many countries are facing as if it were a mere problem of liquidity, since there hasn’t been the series of defaults that some predicted after the Covid-19 pandemic. The reality is that countries in the global south are doing whatever it takes to keep repaying their debts, even if it’s by implementing draconian austerity measures, in many cases following International Monetary Fund (IMF) conditionalities and advice. Debt service payments are indeed drowning out vital public spending. Domestic and external debt service equals the combined total spending on education, health, social protection and climate in low- and middle-income countries, and exceeds it by 50 per cent in Africa. It is 2.5 times the spending on education, 4 times the spending on health and 11 times the spending on social protection.

As bilateral and private lending decreases, multilateral development banks and the IMF are increasing their lending. With no other instrument on the table, multilateral lending is likely to be used to repay private creditors, as well as bilateral creditors such as China. As in the past, we will probably see in the coming years an increase in countries facing problems repaying multilateral debts. This is problematic given that neither the IMF, the World Bank nor other multilateral development banks (MDBs) participate in debt restructurings. Furthermore, as countries increasingly turn to the IMF and MDBs for financial support, they will have to accept the conditionalities imposed by these institutions, which are still focused on fiscal consolidation (including public spending cuts and regressive taxation, among other measures) and market solutions (including promotion of public-private partnerships and deregulation), thus limiting even more the public investment to advance the SDGs, tackle gender inequalities or take climate actions.

The change we need

There is an urgent need to act now.

We fully endorse the outcome document of the Civil Society Organisations Southern-led Meeting on Debt, adopted in Bogota on 21 September 2023, and call on governments to take action and fulfil the demands of the Declaration.

Furthermore, we call on governments to:

Ensure immediate and unconditional debt cancellation of all unsustainable and illegitimate debts, to all countries in need, by all creditors.
Create a permanent multilateral sovereign debt resolution framework that, under the auspices of the United Nations, ensures the primacy of human rights over debt service and a rules-based approach to orderly, fair, transparent and durable debt crisis resolution, in a process convening all creditors.
Establish an automatic mechanism for a debt payment moratorium and a comprehensive, timely and orderly debt restructuring in the wake of catastrophic shocks.
Agree on common and binding principles on responsible borrowing and lending, and ensure compliance with them.
Agree on multidimensional vulnerability indicators and promote an open review as the approach to debt sustainability, under UN guidance and with civil society participation, in order to incorporate climate vulnerabilities, risks and impacts, and human rights and development impact assessments.
Launch genuine, participatory and inclusive debt transparency and accountability mechanisms and processes, allowing access to information about debt management and renegotiations, and including the establishment of a global public debt transparency registry, with mandatory rules that require all lenders and borrowers to disclose information on loans and other debt-creating instruments.
Launch participatory and transparent official debt audits to examine borrowing and lay the ground for suspension and cancellation of loans that: lack public consultation; indicate questionable or fraudulent practices; have resulted in violations of human rights; or have contributed to environmental destruction and the climate crisis.
Address the need for accountability, transparency and further regulation of credit rating agencies (CRA), including correction of the adverse impacts of CRAs on development finance and exploring the creation of publicly owned CRAs.
Ensure that financing mechanisms and debt management and resolution policies incorporate gender impact assessments systematically, putting gender equality and women’s rights over creditors’ claims.
Agree on the cancellation of unsustainable and illegitimate debts generated by fossil fuel projects.

Economic Justice for all project in Ecuador

Taking action

Civil Society Organisations in the debt justice movement have a strong vision for turning inequalities around through a fairer global system. This vision is worked out through:

Advocacy

We intervene in international fora such as UN and International Financial Institutions meetings, meet one-on-one to talk debt-related issues with decision makers, share our research and aim to convince those with the power to make system changes. We organise campaigns, online and street actions to promote our calls and collaborate to strengthen the debt movements worldwide.

Awareness-raising

Who wants to hear about complex debt architecture? The realities of this unjust international financial system are hidden behind layers of complexity, dull accounting and poor transparency. We help the general public understand the glaring consequences of this foggy system. Getting attention to the issues through conventional and social media helps turn the tide in public opinion and put pressure on decision-makers.

Research and analysis

We bring together CSOs from across the world, share information, carry out joint actions, and raise stronger voices together. We also build connections with other sectors, showing the ways that debt justice can be transformative for achieving goals for poverty alleviation, gender justice, climate action and more.

Coordination

We bring together CSOs from across the world share information, carry out joint actions, and raise stronger voices together. We also build connections with other sectors, showing the ways that tax justice can be transformative for achieving goals for poverty alleviation, gender justice, climate action and more.

The movement

The partners in this project work within broader networks that bring together a wide range of CSO voices in the fight for debt justice:

The Global Week of Action for Justice and Debt Cancellation

An open convening space for civil society organisations and social movements that organise campaign actions on debt justice and debt cancellation. The space coordinates the annual Global Week of Action for Debt Cancellation campaign. This convening space also serves as a dedicated space for organisations and networks supporting its principles and calls.

Civil Society Financing for Development (FfD) Mechanism

The CSO FfD Mechanism is an open civil society platform which has been active in its present format (Global Social Economy Group – GSEG) since the Doha FfD Review Conference in 2008, though many of its members are engaged since the Monterrey FfD Conference in 2002. It brings together more than 800 organizations (with more than 950 individual members). The CSO FfD Mechanism includes the Women’s Working Group on FfD.

Women’s Working Group on FfD

An extensive arena for networking, strategizing and alliance building on issues related to Financing for Development, bringing a feminist and women’s rights perspective to the discussions.

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