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Covid-19 on a debt assault
Eric Toussaint interviewed by Christophe Koessler of the daily newspaper Le Courrier, Geneva
by Eric Toussaint , Christophe Koessler
17 April 2020

The Committee for the Abolition of Illegitimate Debt (CADTM) is of the opinion that the limited resources of the countries of the South should be devoted to fight the pandemic rather than reimbursing international creditors.

The coronavirus crisis and its cascading economic consequences could well plunge many countries in the South into an unprecedented crisis, pushing millions of people into poverty. Anticipating the disaster, many NGOs and social movements are once again calling for the cancellation of the - very often unsustainable - external debts that most developing countries have contracted with rich states and international multilateral institutions.

From Pope Francis to the G20, from the French President to the International Monetary Fund (IMF), several appeals and declarations have been made over the last fortnight. Would the coronavirus be the catalyst for poor countries to resolve the debt crisis? Eric Toussaint, an economist and a tireless activist of the Committee for the Abolition of Illegitimate Debt (CADTM) responds to the issues.

On Monday, the IMF announced the payment of “emergency aid” to 25 of the world’s poorest countries, what do you think?

Eric Toussaint: It’s a scam, once again. The IMF has announced a relief of 500 million dollars worth of debt payment. Checking it out, we realize that the IMF will indeed be reimbursed! The nineteen African countries concerned and the other six beneficiaries will have to draw on a fund set up by the IMF and funded by certain rich countries, such as the Netherlands. The IMF is therefore not waiving off the money.

These fundings will therefore not enable the poor countries to deal with the health situation - for example to buy medical equipments and hire staff, - but will be used to reimburse the IMF. This is a strategy that the financial institution has been using with African countries for a very long time : to continue being reimbursed on the back of the contributions by other countries in order to maintain the debtor-creditor relationship that the IMF imposes. This has allowed it to continue to dictate the same type of policies, to the countries concerned for forty years. This has led to an enormous degradation of the health sector and public services, and disarmed them in the face of the current epidemic.

The G20 on Wednesday 15 April 2020 endorsed a suspension of debt service for the poorest countries. Is this a major step forward?

No, because it is not a cancellation, but a postponement of payment granted on a case-by-case basis. This only concerns bilateral debt and therefore excludes a large part of the debts of these countries: multilateral debts and those owed to the private sector. The G20 decision concerns no more than 76 very poor countries. Among them, those that are not in arrears with their payments to the IMF and the World Bank, will be selected.

Most of the debts claimed from these countries are illegitimate since these have not served the people but have been used against their interests. These must be cancelled.

At the end of March, the United Nations Conference on Trade and Development (UNCTAD) called for more to be done by cancelling the debts of developing countries to the tune of USD 1,000 billion. What is your take on this?

On this point, UNCTAD is right. The UN recognizes that the debts of many countries in the South must be written off. UNCTAD has also clarified that debtor countries can unilaterally declare themselves in suspension of payments without creditors being able to demand arrears in the future.

President Emmanuel Macron said on Monday that Africa’s debt will have to be cancelled. Is that a sign of change?

It was merely an announcement. The next day his finance minister said that this would not be possible because of a lack of agreement from other European countries.

Do you think that creditors will still have to give up some of their debts because of the current crisis? It is not in their interest for entire countries to go “bankrupt”?

Frankly, I wouldn’t bet on it. So many years have gone by without any real debt cancellation being granted despite all the valid arguments to the contrary. The cancellations that have taken place over the last 30 years have all been linked to geostrategic interests. In the early 1990s, the United States cancelled part of Egypt’s debt under Mubarak because its government had supported the military intervention in Kuwait against Iraq. Eighty percent of Iraq’s debts were erased in 2004 after the overthrow of Saddam Hussein because it suited the great power and its oil companies. There are other examples.

However, in 1996, an initiative was launched to reduce the burden on the Heavily Indebted Poor Countries (HIPC). Did it not succeed?

This World Bank/IMF initiative provided trickle-down relief, conditional on structural adjustment policies that weakened the public services and economies in question.

These countries had to go through an uphill task to meet a lot of conditions in exchange for a remission. It is clear that they very quickly returned to the same level of indebtedness and even exceeded it. So that was not a solution at all since the economic policies that were dictated to them have in fact maintained their fundamental dependence on debt.

What, in spite of everything, gives reason to hope for more substantial cancellations?

Today, I hope that this health crisis will push people to mobilize and put pressure on their governments. I am in contact, for example, with activists in South Africa because it is one of the countries most affected by the coronavirus and it is in an extremely serious debt crisis. It is possible that the pressure from the streets will increase.

Everything will depend on popular mobilization. CADTM, together with the peasant movement la Via Campesina, the World March of Women, Attac and others, are working to promote them.

Can the main creditors from the North waive off the repayment of these debts without putting themselves in danger?

Cancellation would not stretch them much. In fact, the main reason why they do not waive off their debts is in order to maintain the subordinate relationship between debtor and creditor countries. The debt of poor countries to all these creditors amounts to roughly $1 trillion. This is not a considerable sum for rich countries. As a matter of comparison, the stimulus package announced in the United States in the context of the current coronavirus crisis amounts to 2000 billion dollars, that of Germany to 1000 billion euros.

Argentina delay, Ecuador goes down

Argentina has just decided to postpone the payment of its debt until 2024-2025. Is it leading by example?

Eric Toussaint: This is completely an incomplete measure. The new anti-neoliberal president Alberto Fernández, who took office last December, had all the cards in hand to set up a citizen-controlled audit of Argentina’s debt. He has not done so. His predecessor Mauricio Macri’s new loans of $44 billion from the IMF had been strongly contested, including through legal proceedings, claiming that they violated the constitution.

Alberto Fernández himself had denounced them during his campaign. Once in place, it would have been perfectly legitimate for him to denounce the signed agreements. But he preferred to enter into negotiations with the IMF and thus, in effect, acknowledge the debt contracted by Mauricio Macri. Since then, Argentina’s situation has deteriorated and it has entered into a selective suspension of payments. It is not known whether it will go any further. Members of the presidential majority continue to call for an audit. Several of them have signed an appeal to this effect, including former Vice-President Christina Kirchner’s former Finance Minister.

Ecuador, for its part, decided at the end of March to pay on the dot $324 million. Why did Ecuador decide to pay $324 million?

The Ecuadorian National Assembly passed a resolution the day before asking the government to postpone this payment. However, President Lenin Moreno paid the money. He did not lack any arguments for postponing it since his country was directly affected by the virus. We are faced with a government that prefers to give priority to creditors over the vital needs of its people. A dramatic decision when we know that the health system is in a lamentable state, weakened by two years of anti-social policies imposed by the same IMF, with the active participation of Mr. Moreno.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

Christophe Koessler