Committee for the Abolition of Illegitimate Debt

This is to coincide with the virtual meeting of the 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). later today, and with planed announcements which could include an extension of this initiative and its conditions for repayment, plus - if agreement is finally reached today - the announcement of a new common framework for debt relief and restructuring.

The report outlines how the DSSI was intended to help developing countries with overwhelming debt, exacerbated by the impacts of the pandemic and economic downturn. But it has fallen short.

It finds:

• So far, the DSSI has only covered a meagre 1.66 per cent of debt payments due in 2020 by all developing countries.
• Of the 46 beneficiary countries, it has had very limited impact due to the failure of private and multilateral lenders to participate. As a result, only 24 per cent of the debt payments due to be made between May and December 2020 by beneficiary countries were actually subject to potential debt suspension
• If, as expected, it is extended to the first half of 2021, it would potentially cover only 44 per cent of debt payments by the 46 countries that have so far requested participation in the DSSI.

If the G20 do not compel all creditors to offer substantial debt relief today, money freed up under the DSSI may effectively be used to repay private and multilateral debts and not to fund the response to the Covid-19 crisis.

This report also finds that:

• DSSI-eligible countries are already scheduled to repay USD 115 billion of debt in 2022-2024, just when their suspended 2020 payments are due.
• Middle income countries, many of whom are currently at the epicentre of the pandemic, are left out of this initiative and its extension.

The report calls on G20 governments and IFIs to agree on a number of immediate measures to answer the very urgent needs of the countries most affected by the pandemic and the unfurling debt crisis. This includes scaling up the current DSSI to permanent debt payment cancellation for up four years and to all Global South countries in need, as well as securing the participation of all creditors, including 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.

, other multilateral development banks and private creditors.

The report also calls for a more long-term approach to the debt crisis facing the world, including a dedicated debt relief and cancellation process for all developing countries in the wake of the Covid-19 crisis. In addition, the creation of a permanent mechanism, under the United Nations, for the systematic, comprehensive and enforceable restructuring of sovereign debt Sovereign debt Government debts or debts guaranteed by the government. , is crucial.

Click here to read the report in English.

Click here to read the report in French.