Unitedly we fight against debt and all other oppressions!

8th South Asian CADTM regional meeting, Colombo, Sri Lanka, 18-19 February, 2020.

2 February 2020 by CADTM Asia

A region that was the poster boy of neo-liberal growth and for its emerging middle class is back in news for wrong reasons. The 2018 Global Multidimensional Poverty Index (MPI) by UNDP and the Oxford Poverty and Human Development Initiative (OPHI) reveals higher incidences of poverty in the South Asian region than official estimates. It is evident that economic growth in the region has not benefited everyone, especially the poor. The economic indicators of inequality point towards greater polarisation and this divergence is ever increasing. South Asia’s disproportionate share of the largest number of the poor in the world stands in contrast to the highest number of dollar billionaires this region produces today.

 The debt scenario


With slowing economic growth South Asian economies face an escalation of public debt. In the biggest economy, India, the sovereign debt Sovereign debt Government debts or debts guaranteed by the government. might not be a problem at this point of time, the growing corporate debt is a cause of severe concern. According to a recent McKinsey report, a large part of India’s corporate debt has turned risky in the last decade. India Inc’s corporate debt (including bank loans) stands at 56 per cent of the gross domestic product 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.
(GDP). At first glance, companies appear to be deleveraging. After having risen sharply, the debt-to-gross domestic product (GDP) ratio has been falling since 2016. But this ratio does not fully reflect the actual stress that corporations are facing. When we look at the debt-to-equity Equity The capital put into an enterprise by the shareholders. Not to be confused with ’hard capital’ or ’unsecured debt’. ratio—a more company-specific indicator—we find that the indebtedness of Indian firms has been rising, and is also high compared to their regional peers. Banks’ balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. sheets have not been completely repaired. Non-performing loans remain elevated; and they still bear a large exposure to non-banking financial companies (NBFCs), which took up the slack in lending aggressively, but have since struggled with funding issues. [1]

Another area of major concern is the growth of household debt. Between 2013-14 and 2017-18, according to the Reserve Bank of India’s (RBI’s) ‘Handbook of Statistics on the Indian Economy’, personal loans given by banks went up in by 89 per cent to Rs 19.1 lakh crore. This, when private consumption increased by only 53 per cent, and overall non-food credit went up by an even more sedate 39 per cent. There was an increase of 82 per cent in borrowing for housing, 54 per cent for consumer durables, and 78 per cent for vehicles. The most striking was a 154 per cent increase in “other personal loans”, even as credit card outstanding went up by an even bigger 176 per cent. [2]


The second largest economy of the region, Pakistan, is lured into a debt trap over the last decade. As per latest reports by The Dawn, Pakistan’s general government debt Government debt The total outstanding debt of the State, local authorities, publicly owned companies and organs of social security. (including guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). and the International Monetary Fund 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.

borrowing) declined to 84.7% of GDP, from 88%. [3] In 2020, Islamabad’s economic challenges will be compounded by several factors. One is its failing state-owned enterprises. The domestic debt of these companies — which include Pakistan’s national airline and railway —increased by nearly 250 per cent between 2013 and 2018, and in 2019 they continued to borrow heavily. Their struggles are a big reason why Pakistan’s public debt stood at a whopping 86.5 per cent of GDP in mid-2019. Additionally, in 2020 Pakistan will be implementing the second phase of the China–Pakistan Economic Corridor (CPEC). Islamabad will have to carefully manage the expansion of CPEC — a critical infrastructure project but also a serious debt risk. [4]

Though there is an absence of reliable data with wider coverage about the Pakistan, some studies suggests that the issue is really problematic. According to a recent working paper titled ‘Household debt in Pakistan: Conflict, borrowing and structural indebtedness’, authors Sajid Amin and his colleagues note that even “literature on household indebtedness in Pakistan is very scant, despite household borrowing being common in the country“. [5] Their analyses show that “an average of one-fifth of households in Pakistan are indebted”, whereas in the conflict-affected Swat district about 52 percent of district’s households are in debt. These estimates are based on trends seen over the last fifteen years using data from Household Integrated Economic Survey [HIES] and 2010’s Pakistan Panel Household Survey [PPHS]. [6] The problems indicated by the authors appears to be only a tip of the iceberg.


Thanks to a robust GDP growth contributed vastly by the precariat, Bangladesh’s sovereign debt seems to be under control, for the moment. However, this laboratory of micro-credit is ravaged by household debt. Out of a population of 160 million, 29 million received micro-loans in 2015, for an average amount of €200. The effective 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. rate varied between 35 and 50% (if we include official commissions paid). [7]

Sri Lanka

Micro-credit has been a devastating factor in Sri Lanka as well. Reports suggests that with effective annual 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.
ranging from 40% to 220%. The proliferation of these loans created a debt trap, where new loans were taken or money was borrowed from informal sources to pay back previous loans. [8] After prolonged movements by the victims, a one-time partial write off of loans in twelve drought-affected districts and a national interest rate cap on microfinance of 35% were announced. However, it is still very high. The public debt of this island country is also another source of major concern. According to observers, “the national debt facing the country in 2020 as running into two trillion rupees. This bete-noire is bringing this curse on every new-born child putting it in debt for over two-hundred thousand rupees. This is frightening and staggering when recalling that same type of debt which stood only at Rs. 13,000.00 in the mid nineteen seventies. The national debt which compounds both the domestic and international, is a truly bee in the bonnet that has driven every successive government into a frenzy of deciding even on crazy deals and economic measures that entangled the country even further.” [9]


Similar situation plagues Nepal with rising foreign debt on account of huge infrastructure projects that the country is undertaking. An additional source of concern is the increasing Chinese lending into extravagant and risky infrastructure project that can lead the country into a debt-trap. This apprehension is equally valid for other South Asian countries like Pakistan and Sri Lanka.

 Private Illegitimate Debt

A growing concern in the region is the issue of private illegitimate debt. Examples are abound in almost all the South Asian countries. The micro-credit loan in Sri Lanka or Bangladesh, peasants debt in India and in many other countries, other forms of debt bondages like the debt of brick-kiln workers in Pakistan, India, Bangladesh et al are all examples of an all pervasive exploitation where loans are granted under such harsh conditions that makes its repayment impossible. This results in seizure (of housing, land, working tools) and/or consign people to pay loans over years, decades and generations. Juan Pablo Bohoslavsky, the UN Independent Expert on Effects of Foreign Debt on Human Rights, after his nine day visit to Sri Lanka in 2018 was forthright in saying that ““I found that while there was a large number of borrowers, women in areas that are poor and affected by war, are specially targeted by microfinance lenders. Those institutions charge up to 220 percent interest rates for their loans and apply compound interest. The mechanism has been designed to make huge profits for the lenders and put a very heavy burden on the shoulders of the largely poor female borrowers.” He also added that “it is common to see women with three or four outstanding loans from different lenders at the same time, while some others borrow more to avoid defaulting on the loans they already have. Collectors go to borrowers’ houses to collect the instalments due, sometimes on a daily basis. Some stay at the family home for hours until they are repaid.”

“Women are at times exposed to psychological and physical violence by these collectors and it was brought to my attention that, in some cases, they were pressured by collectors to exchange ‘sexual favours’ for outstanding instalments. I have also learned of cases of borrowers who have tried to sell their kidneys for money to repay loans.”

Nevertheless, there is a strong resistance in Sri Lanka and other regions against the burden of illegitimate private debt. In the case of Sri Lanka, people have registered partial victories since 2018. In the aftermath of protests by the indebted women in the North, the government announced a debt waiver to 12 drought-affected districts. A total of 45, 139 loans were waived off under this policy. [10] However, it’s a minimal measure to address a profound and widespread problem. We have to walk a long road ahead as there are no quick fixes to this catastrophe. Similar conditions are abound in Bangladesh, Pakistan, Nepal, India, etc.

 8th South Asian CADTM regional meeting

It is in this backdrop that the above meeting will take place in Colombo, Sri Lanka on February 18-19, 2020. The meeting intends to discuss the above situations and chart a way for a common struggle to deal with the illegitimate debt, predatory lending and other forms of coercion that enslaves the population of the region. (See attached programme) The meeting also attempts to connect regional struggles with the global ones in order to change the oppressive system that we are forced to bear.

The meeting follows the previous meeting, also held in Colombo in April 2018 where forty delegates, most of them being representatives of social movements (peasants’ movements, feminism, trade unionism, etc.), came together for a three-day long programme. See the report of the earlier programme by Nathan Legrand, South Asia: New creditors and new forms of debt peonage and Eric Toussaint Report on CADTM activities in Sri Lanka and India, 6 - 19 April 2018 and, also the Colombo Declaration

Participants from Bangladesh, India, Nepal, Pakistan, Japan and also from CADTM international secretariat in Belgium will join Sri Lankan participants in this two-day meet. We will update about the discussions and outcomes of our meeting on the CADTM website.


Issues to be covered:
February 18, 2020

  • Global political and economic situation including debt.
  • National situations - Bangladesh, India, Nepal, Pakistan, Japan and Sri Lanka.
  • Corporate debt in South Asia.
  • New creditors in the region, AIIB, NDB, Chinese loans.

February 19, 2020

  • Micro-credit
  • Other household illegitimate debts – peasant debts, debt of brick kiln workers, student debt, etc.
  • Debt as a tool for women’s oppression.
  • International Financial Institutions and their regional incarnations (NDB, AIIB, etc.)
  • Way forward – future actions.




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