Committee for the Abolition of Illegitimate Debt

 Faced with the crisis, governments (notably China) and international financial institutions are taking the place of the private sector

The countries of the Global South were thus encouraged to take on debt during the 2010s, be-fore seeing their access to financing from private creditors reduced from 2022 onwards, and then, for some of them, defaulting on their debts or coming close to doing so.

As was the case during the 1980s, public lenders – especially multilateral ones – took the place of private creditors who were no longer willing to lend because it represented too great a risk of not being repaid or because it was more attractive to lend to the North. This phenomenon is clearly illustrated in Graph 10, below.

Graph 1 : Multilateral loans to developing countries (excluding China)

Since 2020, and mainly in 2020, 2022 and 2023, multilateral loans to countries in the Global South have risen sharply. The amounts disbursed are more than double those of 2013 - 2017. Among these multilateral creditors, the 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 is back with a vengeance since 2020 (see below), 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.

retains a leading role, and regional development banks (such as the African Development Bank) play a role, albeit a smaller one.

The same trend applies to bilateral creditors (states that lend to other states), who also act as lenders of last resort when private creditors are no longer willing to lend to countries in difficul-ty. Figure 11 shows this trend across South Asia, with bilateral lending much higher in the 2018-2023 period than in previous years. Among bilateral creditors, China has notably taken advantage of the debt crisis to extend its influence within the framework of the New Silk Roads. We have elaborated on this in this article.

Graphique 2 : Prêts bilatéraux aux pays d’Asie du Sud, en milliards de dollars courants.

Bilateral and multilateral creditors – such as the International Monetary Fund – therefore grant emergency loans and provide countries in difficulty with the foreign currency they need to con-tinue importing that which they do not produce and to continue repaying private creditors.

Multilateral lenders – mainly the IMF and the World Bank – systematically impose political conditionalities in exchange for these loans. They require governments to cut social spending – in countries that have defaulted on their debts and are in economic crisis, and whose populations are generally already in dire straits – privatise their economies, and open them up ever wider to neoliberal globalisation, with ever-increasing specialisation in the production and export of a few goods, thereby removing the country’s independence in terms of food supplies...

 The IMF is back with a vengeance, imposing ever more violent political conditionalities on populations, especially women and indigenous communities.

When the South goes through a debt crisis – as was the case in the 1980s and has been the case since 2020 – the IMF and its conditionalities are never far away. Since the Covid-19 crisis, the International Monetary Fund has returned with a vengeance. Between 2020 and the end of 2023, it lent nearly 100 countries a total of $300 billion [1].

Graph 12: IMF loans to developing countries (in billions of US dollars)

This graph perfectly illustrates the International Monetary Fund’s return to prominence in the countries of the Global South. The international financial institution, which lent almost nothing to these states between 2011 and 2017, has lent over $50 billion to these countries in 2020, over $35 billion in 2022 and almost $30 billion in 2023. As regards 2018 and 2019, the $44 billion loan to Argentina weighs heavily in the global figures.

 
Graph 4: IMF loans to developing countries in 2020

Graph 13 illustrates to whom the Bretton Woods organisation lent during 2020, when IMF loans peaked. Sub-Saharan Africa received $18 billion in loans from the International Monetary Fund in 2020, making it the area with the largest loan total. Later, we’ll revisit this.

The IMF enforces more neo-liberal policies with every loan. Its two primary goals are:

1. To guarantee the repayment of private creditors impacted by a country’s economic challenges or default risk.
2. To further deepen the globalised neo-liberal economic system, thereby reducing to a minimum the protective and regulatory role of the state, to the detriment of the vast majority of the population, and to the advantage of an ultra-minority capitalist class.

On the other hand, as Camille Bruneau and Christine Vanden Daelen have shown in Nos vies valent plus que leurs crédits. Face aux dettes, des réponses féministes, published in 2022, the IMF’s neo-liberal policies have a specific impact on women [2]. Depending on the region and the context, the following realities manifest themselves to a greater or lesser extent and may com-bine:

• Women are often the main workers in the sectors in which budget cuts are made, whose jobs are eliminated (e.g., cuts in hospital (nursing) and crèche budgets in the North).
• Women make up the bulk of users of the closed public services.
• Women work for free in order to make up for social and economic disasters as well as the closure of social services. In the North, for instance, women fill the void left by the closure of childcare facilities and elderly homes by taking care of their loved ones, which results in them working double or triple shifts.
• Women are the world’s leading producers/farmers. The race for profitability, favouring large-scale farming to the detriment of “small” women producers, destroys their means of subsistence and production. Jules Falquet explains that the imposition of intensive export monocultures, central to the IMF’s agenda, deprives women of their livelihoods [3]. She shows that the extractivist system as a whole is destructive for living organisms, for the environment and for indigenous communities, which are increasingly under threat all over the planet.
• Sexual and gender-based violence is on the rise in our patriarchal systems at times of crises. The repercussions are felt by women through their blood and occasionally even their lives. They also suffer from the rapes and killings committed by large mining firms in Latin America, as well as the gender-based violence that is increasing as a result of mega-projects.
• They are the heads of households and small entrepreneurs who take out microcredit and consumer loans to provide for their loved ones and families. The withdrawal of the State and its social services forces them to take on debt themselves and then face pressure from microcredit institutions, which do not hesitate to charge very high interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…
  
  The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation. and intimidate borrowers who fall into arrears.

The IMF also encourages the creation of free-trade zones. The multinationals that profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. from this neo-liberal globalisation set up shops in regions where labour is cheap in order to be as competitive as possible in the market. This workforce is essentially, and sometimes exclusively, female. In Bangladesh, factories exploit hundreds of thousands of women without any safety standards. In 2013, Rana Plaza, a garment factory supplying various international brands, col-lapsed, killing at least 1,135 people. In 2023, ready-made garment workers in Bangladesh demonstrated. They demanded higher minimum wages and were violently repressed. 161 of them were prosecuted.

Jules Falquet also showed that the race for foreign exchange—to import everything countries don’t produce—and to pay off their debts drives governments to encourage the export of female labour abroad. For example, many Nepalese and Sri Lankan women go off to work in the Gulf States for poverty wages in terrible conditions. Similarly, industrial over-tourism is generating an increase in activities that degrade women. In In particular, destinations promote the “exotic beauty” of local women.

To sum up, the pattern that led the global South to a debt crisis, which in turn led to a deepening of neo-liberal policies in these countries, is as follows:

1. Private creditors increased their lending to Southern countries in the 2010s, as interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. rates were unattractive in the North. The countries of the global South were therefore able to finance themselves by issuing securities and borrowing via private banks.
2. In 2020, as a result of the economic crisis linked to Covid-19, the so-called developing countries saw their foreign exchange earnings plummet due to a drop in tourism and supply flows.
3. In 2022, speculation on grain and input prices—then their rise was linked to real short-ages—was linked to Russia’s invasion of Ukraine, and the rise in interest rates decided by the major Western central banks increased foreign currency expenditures for the countries of the Global South (higher interest rates and higher prices for imported grain and inputs).
4. By 2020, therefore, the foreign currency earnings needed to finance imports and repay external debt have fallen. In 2022, foreign currency expenditure has increased. We had to repay and pay more with less.
5. Private creditors returned to the North because interest rates were once again attractive and because the countries of the South presented risks of non-repayment.
6. This situation led to a debt crisis in several countries, some of which defaulted.
7. The Global South received assistance from bilateral and multilateral creditors, including the IMF and the World Bank. They lent money to the countries of the South, enabling them to continue repaying their creditors and importing goods they didn’t produce.
8. The IMF does not lend for nothing. In addition to interest and possible penalties, it im-poses political conditionalities on the governments it lends to. These conditions are syn-onymous with budget cuts, privatisations, the deepening of the extractivist export sys-tem, the maximum opening up of economies at the expense of local populations, etc.

This is the unending cycle of debt. Even when borrowing conditions seem good, even when interest rates are low, the debt of the global South always ends up backfiring on the populations when governments accept loans from the International Monetary Fund and other multilateral lenders.

To illustrate more precisely how the system works, let’s take some concrete examples: sub-Saharan Africa, Sri Lanka, Argentina and Ukraine.

Translation by Sushovan Dhar