Open Letter to All Governments, International Institutions and Lenders

This letter will be sent to leaders of all governments, international institutions and lender groups on October 14.

14 October by CADTM International , Collective


Covid-19 has turned our world upside down.

The Covid19 pandemic has severely impacted on the health, safety and survival of hundreds of millions of people. Communities worldwide are being pushed deeper into poverty, precarious existence and inequality – with the massive loss of paid and self-employment and livelihoods and further limiting of access to food, water and sanitation, adequate housing, education, health service and other basic needs. It is estimated that 500 million more people could be pushed into poverty as a result of the pandemic and the economic downturn that it has exceedingly exacerbated. In all the regions of the world, violence against women, girls and LGTBI+ people has escalated in number and severity.

This is an unprecedented moment of intense multiple crises with Covid-19, the global economic recession, the care crisis and the escalating climate and ecological emergency. Despite the urgency and scale of human suffering, governments and the international community are failing to move into emergency mode for people and communities.

These conditions shine a strong light on the continuing debt problem that stands in the way of people’s survival, the fight against inequality, the realization of their human rights, sovereignty and the self-determination of peoples, economic, gender and ecological justice, and the pursuit of a dignified life.

Over $300 billion is being spent annually by the global south for Public External Debt payments to bilateral and multilateral lenders such as the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

and IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
, private banks, speculators and investors in government bonds and securities. The debt problem is compounded by illicit financial flows also in the billions of dollars. This is money that is vitally needed for public investment on vital healthcare to fight Covid-19, economic and structural assistance to affected, vulnerable and marginalized individuals, families and communities, and building economies towards more just, equitable, climate resilient and sustainable systems.

Given the urgency and severity of the crisis we face, the responses to the debt problem have been severely insufficient in the best case, and in many occasions counterproductive.

The IMF announced a Covid-19 debt relief package in April 2020 and said it will use $500 million to cover several months of debt payments being made to the IMF by 28 countries. The IMF says it eventually aims to cover two years’ worth of payments, but this would depend on whether it receives additional pledges from member governments for its Catastrophe Containment and Relief Trust (CCRT). In fact, the IMF did not write off its claims. The contributions of several rich countries to CCRT were used to repay IMF claims from these 28 countries.

In the same month, G20 G20 The Group of Twenty (G20 or G-20) is a group made up of nineteen countries and the European Union whose ministers, central-bank directors and heads of state meet regularly. It was created in 1999 after the series of financial crises in the 1990s. Its aim is to encourage international consultation on the principle of broadening dialogue in keeping with the growing economic importance of a certain number of countries. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, USA, UK and the European Union (represented by the presidents of the Council and of the European Central Bank). governments introduced the Debt Service Debt service The sum of the interests and the amortization of the capital borrowed. Suspension Initiative (DSSI) - not a cancelation but merely an eight-month delay of up to $12 billion worth of payments for public debts, and only 73 countries were considered eligible. Of this, just $5.3 billion of bilateral debt has actually been suspended to 43 countries, all of which is now due to be paid between 2022 and 2024.

Private lenders have so far refused to cancel or suspend any of the debt they claim. Similarly, multilateral development banks, such as the World Bank, have also failed to cancel debt.

Meantime, the World Bank, the African Development Bank, the Inter-American Development Bank, and the Asian Development Bank are making available a combined total of $205.5 billion of loans for Covid-19 response measures. The IMF has approved more than $88 billion in emergency loans in the last 6 months to 81 countries. It is a travesty of justice that countries in the Global South will end up with even more debts in the face of the multiple crises.

The staggering problem of debt is beyond the bleeding of public coffers in the face of great need and vulnerabilities.

Much of this debt is illegitimate, lent irresponsibly and unfairly, driven by predatory lending, used to finance harmful projects and policies, failing to comply with legal and democratic requirements, saddled with onerous and unjust terms, incurred by private corporations but assumed by governments or incurred through public guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). of private profits, wasted or stolen.

Policy conditions attached to loans, including cuts in public services and social protection, privatization and severe austerity programs, have also caused as great if not greater harm than debt servicing, especially on women and girls, indigenous peoples and most impoverished and vulnerable people and communities. These conditions have exacerbated social conflict, criminalization of poverty, and militarization and repression.

Moreover, debt and the “indebtedness”of countries of the South is both a consequence and a tool for domination - subverting the ability of countries and peoples to shape their own economic programs and undermining sovereign institutions and democratic processes.

All these are in stark contrast to the fact that peoples of countries in the Global South have paid for the debts incurred in their name so many times over - with their money, their livelihoods, their safety, well-being, their lives, and the health of the planet. And all these in contrast to the much greater social, historical and ecological debt owed to the people of the South through centuries of colonial and post-colonial plunder and extraction of their natural resources and exploitation of their labor, including women’s unpaid domestic and care work.

We demand for much more than “debt relief,” we demand debt justice.

We call on world leaders, national governments, financial institutions, public and private, to take urgent, just, ambitious action, in compliance of their obligations and responsibilities and commit to the following:

  1. Unconditional cancellation of public external debt payments by all lenders - bilateral, multilateral and private lenders - for all countries in need for at least the next four years as an immediate step and a clear program towards the unconditional cancellation of outstanding debt; In addition, borrowing governments have it within their power to stop making debt payments but they should not suffer any form of penalties for doing so;
  2. Use of resources freed from debt to address immediate needs for vital and universal healthcare, social protection, and other essential services and rights, secure the safety and well being of people and communities, provide economic and structural assistance to affected, vulnerable and marginalized individuals, families and communities, undertake urgent climate action, and build economies that are equitable, uphold human rights, promote gender, race and ecological justice, are climate resilient and compatible with the health of the planet
  3. National debt audits - both government audits and independent citizens’ audits - that will critically examine the nature, purpose, terms and conditions, actual use of loans, and the impacts of loan-supported policies and programs, and thorough-going review and changes in lending, borrowing and payment policies to prevent the re-accumulation of unsustainable and illegitimate debt
  4. A fair, transparent, binding and multilateral framework for debt crisis resolution (under the auspices of the UN and not in lender-dominated arenas) that addresses unsustainable and illegitimate debt;
  5. Thorough-going national and global review and changes in lending, borrowing and payment policies and practices aimed at preventing the re-accumulation of unsustainable and illegitimate debt, strengthening democratic institutions and processes, and upholding human rights and peoples’ self determination
  6. Recognition and application of the primacy of human rights and the corresponding obligations of the States, the international community and private actors, including the extraterritorial responsibility of each State for the impacts of the action or omission of companies, speculators and investors under its jurisdiction.
  7. Reparations for the damages caused to countries, peoples and nature, due to the contracting, use and payment of unsustainable and illegitimate debts and the conditions imposed to guarantee their collection.

We seek the decisive and full solution to the debt problem as part of the profound transformation of economic and financial systems that the present crises so urgently demand.

Participating Organizations

Global

Regional

Countries




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