Out of service: How public services and human rights are being threatened by the growing debt crisis

25 February 2020 by Iolanda Fresnillo , Eurodad

Public services play a critical role in advancing human rights and fighting inequality. However, growing levels of external public debt, especially in the global south, threaten the very services on which citizens depend in order to have even a basic standard of living.

External debt levels are once again increasing and a new wave of debt crises is unfolding. The current trend of addressing debt sustainability problems through neoliberal austerity policies reduces, rather than increases, available economic resources. The resulting budget cuts and promotion of privatisation strategies, along with public-private partnerships (PPPs), ultimately endanger the capacity of public services to advance human rights and achieve the Sustainable Development Goals (SDGs), including women’s rights and gender equality.

This report takes a closer look at the impact of debt crises on public services and how in impoverished countries in particular there is a negative impact on people’s rights – particularly on the rights of women. When existing gender inequalities, along with women’s practical and strategic needs and interests, are taken into consideration in public services design, they can help address the barriers women face in a range of sectors and situations. But when resources for public services are not available, achieving gender equality becomes extremely difficult.

 A deteriorating debt landscape

Since 2011, general government gross debt Gross debt This concept does not include government assets. The debt in the terms of the European Stability and Growth Pact (SGP) is a consolidated gross debt, meaning that it does not take into account either public assets or debts between public administrations. To take the example of a household of several people, the household’s debt, as understood in SGP terms, would be the sum of the total debt of those people but would not count any sums that they might have lent one another. Nor would the debt be reduced by the value of goods that belonged to the household, such as their car or their house. to GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
ratios have increased across all regions in the global south.

This report outlines how:

Additionally, at least 20 governments in the global south spent more than 20 per cent of their revenue to service external debts in at least one of the last five years. In some cases, such as in Angola, Djibouti, Jamaica, Lebanon, Sri Lanka or Ukraine, more than 40 per cent of government revenue was destined for external public debt service at some point between 2014 and 2018. Worryingly, in most cases, this is due to an increase in debt payments, rather than a decrease in revenue, 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.

projections do not indicate a reversal of this trend in coming years.

 The impact of debt crises on public services and human rights

Under international human rights law, states have a duty to promote social progress and better standards of living, including by allocating sufficient resources to public service provision. Yet, in a global context where a neoliberal approach dominates, austerity measures are being implemented in the name of fiscal discipline and non-debt related government spending has decreased significantly in recent years. As a result, fewer and fewer resources are being allocated to public services.

This report shows how:

  • Between 2014-18 resources spent on public services dropped by more than 18 per cent in Latin America and the Caribbean and by 15 per cent in Sub-Saharan Africa. Looking ahead, the International Monetary Fund (IMF) predicts that this trend will continue in all regions.
  • According to these projections, government spending in Sub-Saharan Africa will reach a historic low in 2024, at 20.74 per cent of GDP. In Latin America and the Caribbean spending is projected to fall from 33.74 per cent in 2014 to 29.85 per cent of GDP in 2024. In the Middle East and Central Asia from 32.96 per cent in 2014 to 29.82 per cent in 2024. Meanwhile the IMF predicts debt levels will continue to increase.
  • This is already having a direct impact on basic services such as education or health. In at least 21 low- and middle-income countries, government education expenditure as a percentage of GDP decreased between 2015 and 2017, while debt service as a percentage of GDP was increasing. Similarly, in the 39 countries where data is available, the domestic general government health expenditure per capita decreased between 2014 and 2016, while debt service per capita increased.

The impact of austerity measures and, in particular, budget cuts to essential public services, falls more heavily on women and girls. It is mainly women who will carry the extra unpaid burden of the care Care Le concept de « care work » (travail de soin) fait référence à un ensemble de pratiques matérielles et psychologiques destinées à apporter une réponse concrète aux besoins des autres et d’une communauté (dont des écosystèmes). On préfère le concept de care à celui de travail « domestique » ou de « reproduction » car il intègre les dimensions émotionnelles et psychologiques (charge mentale, affection, soutien), et il ne se limite pas aux aspects « privés » et gratuit en englobant également les activités rémunérées nécessaires à la reproduction de la vie humaine. tasks that public services will eventually stop providing (or as both quality and coverage decrease). Women are concentrated more heavily than men in lower-income sectors of society, thus women are more affected by cuts in social protection programmes and food or energy subsidies, or, for example, by the removal of vital services for survivors of gender violence. Public workers’ wage caps directly impact women’s income and economic security, as the public sector tends to be a major source of employment for women.

 A new approach to dealing with debt

If we are to avoid yet another “lost decade” for human rights and development as the new wave of debt crises unfolds, there is an urgent need for IFIs and governments to adopt a new approach to sovereign debt Sovereign debt Government debts or debts guaranteed by the government. crisis prevention and resolution. One that puts people first and protects their rights over creditors’ profits.

Governments must rise to their obligations under international law, and adopt proactive approaches to embedding human rights and gender equality in public policy-making, including through integrating gender-sensitive human rights impact assessments into policy planning and debt management. Moreover, adopting a more comprehensive approach to assessing debt sustainability, that encapsulates human rights, alongside other social, gender, environmental and development considerations, will be critical to strengthening debt crisis prevention and buffering populations from the impacts of over-indebtedness.

When crisis hits, and debt restructuring becomes unavoidable, delays increase the economic and social cost of restructurings and prolong the timespan during which sovereign debt problems impact negatively on public services. On the other hand, more timely, comprehensive, and efficient restructurings could lead to fairer and more sustainable outcomes.

Eurodad, other civil society organisations (CSOs), and critics have long highlighted the absence of a multilateral sovereign debt workout mechanism to provide this systematic approach to crisis resolution. This report illustrates that as the debt outlook deteriorates across the globe, international efforts to develop and agree upon such a mechanism must be renewed. In the interim, creditors and IFIs should work to promote more timely and effective restructurings, and cease to promote an orthodoxy that relies on harmful austerity-focused policies and loan conditionalities.

Against the background of a new global debt wave, the erosion of public service expenditure through direct, austerity-driven cuts and rising debt payments is already jeopardising viable routes to achieving the 2030 development agenda, the Beijing Platform for Action on gender equality, and the Paris climate goals.

The urgency is clear. Now is the time to enact long needed reforms to an international sovereign debt resolution system that is arguably out of service.

Download the report here

Source: Eurodad

Iolanda Fresnillo

is a member of La PACD (Plataforma Auditoria Ciudadana de la Deuda) and Eurodad.

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