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Rethinking alternatives to counter the surge of debts to be repaid
by Eric Toussaint
22 February 2022

The Financial Times notes that “poorest countries face $11 bn surge in debt repayments” in 2022 while the World Bank warns against “disorderly defaults.” [1].
Poorest countries face $11 bn surge in debt repayments in 2022

Some 74 low- and middle-income countries “will have to repay an estimated $35 bn to official bilateral and private-sector lenders in 2022”, which is a 45% increase compared with 2020, “with Sri Lanka seen as one of most vulnerable.” [2] Ghana, Salvador and Tunisia could also be in jeopardy. Zambia defaulted in 2020 on an amount of $3 billion and the situation has not improved. [3] The Zambian government is negotiating a new loan from the IMF, which, if granted, will demand more austerity measures.

74 low and middle-income countries will have to repay an estimated $35 bn to official bilateral and private-sector lenders in 2022, which is a 45% increase compared with 2020

Poorest countries face $11 bn surge in debt repayments this year after many had turned down the 2020 IMF and WB relief proposal that came with new conditionalities and thus with a further loss in their sovereignty. They applied to the capital markets to finance measures against the coronavirus pandemic.

David Malpass, President of the World Bank, warned that the creditors’ insistence on being paid will increase the risk of disorderly defaults. “Countries are facing a resumption of debt payments at precisely the time when they don’t have the resources to be making them,” he said.

As explained in the Financial Times, this surge is a consequence of developing countries contracting ever more debt to face the impact of coronavirus, but also of the rising cost of refinancing existing loans and the resumption of debt repayments that had been suspended during the pandemic.

The President of the World Bank warned of an increased risk of disorderly defaulting.

The World Bank observes that about 60% of low-income countries have to restructure their debts (or are dangerously close), which makes new sovereign debt crises likely. The Institute of International Finance, an association of major banks and private financial companies, has established that bonds issued by governments and companies in low- and middle-income countries amounted to $300 bn a year in 2020 and in 2021, i.e. three times more than before the pandemic.

DCs issued so many sovereign bonds that they are facing difficulties repaying in spite of a global initiative devised by the G20, the IMF, the World Bank and the Paris Club that aimed at relieving their debt burden but eventually fizzled out. [4]

About 60% of low-income countries have to restructure their debts

The aim of the Debt Service Suspension Initiative, launched by large economies in April 2020, was to defer about $20bn owed by 73 countries to bilateral lenders between May and December 2020. In October 2020 the CADTM had denounced the G20 measures in no uncertain terms. [5] But despite being extended to the end of 2021, only 46 countries requested to benefit from this initiative. This is acknowledged by the Paris Club itself. [6] It has to be noted that in 2020 and 2021 these countries still had to pay their debt service to private creditors and to a number of multilateral lenders. In 2022 they must resume repayment of their full debt service, i.e. to private, multilateral and bilateral creditors.

The pandemic also deepened fiscal deficits. More than half of the poor countries are now over-indebted or close to it, compared with 30% in 2015. The new profile of creditors will make debt restructuring more difficult. Within ten years, the private sector has indeed become the first lender to low- and middle-income countries. In 2019 it held 40% of Africa’s total external debt, compared with 17% twenty years earlier.

Borrowing costs are rising

In the first two years of the pandemic, the cuts in interest rate decided by central banks made it rather cheap for governments to borrow since lenders were looking for better returns in the Global South than those they achieved in the North. But as investors expect global monetary conditions to tighten, the cost of refinancing existing debts is rising. The US Federal Reserve has started to raise rates in order to fight inflation at home, which is likely to lead to the repatriation of capital to the North, and particularly to the US.

In many countries, interest rates remain below the pace of price growth, and cross-border capital is leaving emerging market stocks and bonds. Foreign investment funds have started to move away from emerging markets. “Market access is a wonderful thing to have when there is cheap money out there, but there might be a different view as conditions tighten,” said Ayhan Kose, head of the World Bank’s economic forecasting unit.

The problems of debt are mounting . . . We really are at risk of another lost decade for developing countries,” said Rebeca Grynspan, secretary-general of the United Nations Conference on Trade and Development.

The problems of debt are mounting and the fiscal space of the developing world will continue to shrink. We really are at risk of another lost decade for developing countries,” said Rebeca Grynspan, secretary-general of the United Nations Conference on Trade and Development.

Gregory Smith, an emerging-market strategist at M&G Investments, said: “Another debt crisis, however, triggered, would have very strong impacts on countries with high debt levels. . . ”

The “common framework” forces participating countries to first negotiate terms with bilateral lenders and the IMF, and then to obtain the same debt relief from private creditors. Only Chad, [7] Ethiopia and Zambia have so far applied, and there has been little progress in negotiations.

Beyond the warnings issued by the World Bank and other institutions

Next to conjunctural factors in the onset of this new debt crisis in the global South, we wish to highlight its structural and historical causes.

Since countries of the South became independent, the World Bank, the IMF, the Paris Club, the ruling classes in the North and in the South have claimed that a country of the South that aspires at economic progress has to both get into debt and open its domestic market to foreign goods and investments. The same actors claim that countries of the South that have commodity resources must exploit and export them. This dogmatic approach that rests on the threefold diktat debt, the maximal opening of the economies and extractivism keeps those countries in a position of dependence, subordination, under-development and permanent indebtedness. The overwhelming majority of people in those countries live precarious lives at best or in the starkest poverty.

The debt contracted by most governments is used to fund projects and policies that actually increase the country’s dependence and eventually fail. Far from getting rid of its debt, the country enters a spiral of permanent indebtedness. New loans are used to repay old ones. From time to time, external circumstances make repayment very difficult or downright impossible. The most frequent causes are a rise in interest rates at the international level, which increases the cost of debt refinancing, a rise in the prices of imported goods, which increases the bill for imports in hard currencies, the revaluation of the dollar or other hard currencies against national currency, a bad crop that lessens the yield of exports, a fall in the price of exported goods, the consequences of an international economic crisis, the impact of a pandemic… In the case of Sri Lanka, it is indeed the Covid-19 pandemic that makes the situation difficult. As the country depends on currencies brought in by foreign tourists, the pandemic resulted in a sudden fall in its revenues and the government finds it very hard to repay its debt.

Box: Theoretical lies

According to the dominant economic theory, development in the South is held back by a shortage of domestic capital (that is, local savings). Still, according to dominant economic theory, countries who want to launch business projects or accelerate their development must rely on external capital via three channels: first, contracting external debt; second, attracting foreign investments; third, increasing exportation to bring in the hard currency necessary for purchasing foreign goods that enable growth. The poorest countries supposedly also need to attract aid by conducting themselves in ways that gain the favour of the developed countries.

Reality contradicts that theory: in fact, the developing countries provide the capital to the industrialized countries, [8] More information on dominant theories Theoretical lies of the World Bank

Collaboration between the World Bank and the IMF is fundamental for exercising maximum pressure on public authorities. And to complete the process of putting the public sphere and public authorities under its control and further extending the dominance of the model, World Bank/IMF collaboration extends to the World Trade Organization (WTO) since that entity’s creation in 1995.

Governments – allied with transnational corporations – use the coercive action of multilateral public institutions to impose their model on the people

The hidden agenda, the one that is actually applied, is to subordinate the public and private spheres of all human societies to the capitalist imperative of seeking maximum profit. The implementation of this hidden agenda results in reproducing poverty rather than reducing it and in increasing inequalities rather than reducing them. It results in stagnation, if not deterioration, of the living conditions of a great majority of the world’s population, concurrently with a greater and greater concentration of wealth in the hands of a smaller and smaller elite. A further result is the continued deterioration of ecological balances, which means that the very future of humanity is in danger.

One of the numerous paradoxes of this hidden agenda is that in the name of ending the dictatorship of the State and liberating the forces of the market, governments – allied with transnational corporations – use the coercive action of multilateral public institutions (World Bank-IMF-WTO) to impose their model on the people.

Breaking away from a model and a system that maintain poverty and increase inequalities

Leaders of multilateral institutions voice their concern about risks of debt repayment suspension, the increase of inequality and the widening gap between rich economies and those that have been impoverished by the model outlined above.

Yet they do not express any self-critical view, they never highlight the real causes.

This is why we have to radically break away from the model implemented by the World Bank, the IMF, the WTO, the OECD, the Paris Club, and the ruling classes in the North and in the South.

The belief that development and the productivist model are interdependent must be radically challenged. Such a development model excludes any protection of cultures and their diversity; it exhausts natural resources and irremediably damages the environment. That model considers the protection of human rights to be at best a long-term goal (when in fact in the long term we will all be dead). Most often, human rights are perceived as an obstacle to growth. The productivist model considers equality an obstacle, if not a danger.

The belief that development and the productivist model are interdependent must be radically challenged

If popular political movements were able to gain governmental power in several developing countries and create their own development bank and their own international monetary fund, they would be quite able to do without the World Bank, the IMF and the private financial institutions in the highly industrialized countries.

It is not true that developing countries must resort to indebtedness to finance their development. Today, indebtedness serves essentially to continue the flow of debt repayments. Despite the existence of large foreign reserves, the governments and ruling classes of the South do not increase investments in local production and social spending.

Today, indebtedness serves essentially to continue the flow of debt repayments

The dominant view that sees indebtedness as an absolute need must be challenged and rejected.

Further, countries must not hesitate to cancel or repudiate odious and illegitimate debts.
Indeed most debts were contracted against the interest of the population.

That being said, public indebtedness is not in itself a bad thing if it is conceived of in a radically different way than under the current system.

Public borrowing is quite legitimate if it serves legitimate projects and if those who contribute to the loan do so legitimately.
Public indebtedness is not in itself a bad thing if it is conceived of in a radically different way than under the current system.

Public debt could be used to finance ambitious programmes of ecological transition instead of to enforce anti-social, extractivist, productivist policies that foster competition between nations.

Public authorities can use bond issues too, for example:

  • finance the complete closure of thermal and nuclear power plants;
  • replace fossil energies with renewable sources of energy that respect the environment;
  • finance a conversion from current farming methods, which contribute to climate change and use large amounts of chemical inputs which decrease biodiversity, to methods that favour local production of organic food to make farming compatible with the fight against climate change;
  • radically reduce air and road transport and develop collective transport and the use of railways;
  • finance an ambitious programme of low-energy social housing;
  • finance public medical research and expenditures for public health to deal with the serious health problems that affect humanity.

A government of the people will not hesitate to force corporations (whether national, foreign or multinational), as well as richer households, to contribute to the bond issue without drawing any profit from it, i.e. with zero interest and without compensation for inflation.

At the same time, a large portion of households in the working classes will easily be persuaded to entrust their savings to the public authorities to fund the legitimate projects mentioned above. This voluntary funding by the working classes would be remunerated at a positive actual rate, for instance, 4%. This means that if annual inflation reached 3%, the public authorities would pay a nominal interest rate of 7%, to guarantee an actual rate of 4%.

Such a mechanism would be perfectly legitimate since it would finance projects that are really useful to society and because it would help reduce the wealth of the rich while increasing the income of the working classes.

Other measures can also be taken to finance the budget of the State in a legitimate way: obtaining credit from the central bank at zero interest, establishing a tax on large fortunes and very high incomes, levying fines on companies guilty of large-scale tax evasion, radically reducing military expenditures, ending subsidies to banks and major corporations, increasing taxes on foreign companies, in particular in the raw-materials sector, and yet others.

But sooner or later the peoples will free themselves from the slavery of debt and oppression imposed on them by the ruling classes in the North and South. Through struggle, they will succeed in imposing policies that redistribute wealth and put an end to the productivist model that is so destructive of nature. Public authorities will then be forced to give absolute priority to guaranteeing fundamental human rights.

Exit the vicious cycle of indebtedness without entering a politics of charity

Exit the vicious cycle of indebtedness without entering a politics of charity

For that to happen, an alternative approach is required: the vicious cycle of indebtedness must be ended while avoiding the trap of a politics of charity aimed only at perpetuating a worldwide system dominated entirely by capital and by a few major powers and transnational companies. The solution is to set up an international system of redistribution of revenue and wealth in order to repair the centuries of looting to which the dominated peoples of the Periphery have been and are still subjected.

These reparations, in the form of donations, would not give the industrialized countries any right to interfere in the affairs of the people receiving compensation. In the South, mechanisms for deciding and overseeing how these funds would be used need to be invented and put in the hands of the people concerned and their public authorities. That opens up a vast area of reflection and experimentation.

The author is grateful to Claude Quémar and Milan Rivié for their careful reading.

Translated by Christine Pagnoulle

Footnotes :

[1Financial Times, “Default alert as poorest countries face $11Bn surge in debt payments”, 18 January 2022


[3See pages 7 and 8 of the May 2021 Eurodad report,, and Financial Times, “Zambia’s president vows not to favour Chinese creditors in restructuring”, 31 January 2022.

[4Milan Rivié, “6 months after the official announcements of debt cancellation for the countries of the South: Where do we stand?,” 18 September 2020.

[5CADTM International, The CADTM denounces the G20’s measures on debt, 17 October 2020.

[7IMF Report n°21/267 on Chad, available on the IMF website, accessed on 17 February 2022.

[8Milan Rivié, “Illicit Financial Flows: Africa is the world’s main creditor,” (, 5 November 2020) ( [accessed 30/12/2021

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.