1. The Double Challenge of Overcoming the Covid-19 Crisis in the Global South: Some Aggravating Factors

The Covid-19 crisis is a double challenge for the countries of the Global South, including African countries. As everywhere, it will be necessary to be able to respond quickly and effectively to the health crisis and the economic crisis.

But unlike the most industrialized countries, the vast majority of the Global South countries do not have sufficiently resilient healthcare systems, neither logistically (infrastructure and equipment), humanly (hospital staff), financially (investments, available resources) nor socially (social security and protection systems). This state of affairs jeopardizes the prospect of providing immediate care to those affected, and in the medium term eliminating the pandemic and in the longer term protecting themselves from it.

Entangled in an extractivist, low-paying and destructive export “model”, the countries of the South remain largely vulnerable to exogenous factors

In economic terms, the situation is similar. In the North, countries are heavily affected but appear to be more resilient. On the other hand, for the most part entangled in an extractivist, low-paying and destructive export “model”, the countries of the South remain largely vulnerable to exogenous factors. The dizzying drop in commodity prices has had a severe an impact on their revenues as it deprives them of foreign currency, causing them to deplete the foreign exchange reserves they need to repay their external public debt and purchase imported products, especially food. At the banking level, the shares of the main banks of the largest economies have fallen sharply. And on the whole, their central banks do not have sufficient means to implement massive “rescue plans”, as is the case elsewhere with the upscaling of the - highly questionable - quantitative easing measures carried out in recent weeks by the European Central Bank (ECB) and the US Federal Reserve. Other factors are further aggravating the situation. The United Nations Conference on Trade and Development (UNCTAD) is predicting a likely 40% decline in foreign direct investment (FDI); [1] capital flight to the motherhouses of Northern companies is accelerating; tourism-related revenues will be sharply reduced or even absent; the financing of governments through bond issues is made all the more difficult as investors are looking for safe investments; interest rates on sovereign loans, already very high, are rising; remittances from the diaspora, which are much higher than official development assistance, [2] are declining; not to mention the direct and indirect impacts on the real economy, the informal economy and populations.

Without claiming to defend this system and wishing for a return to “normal”, these indicators do not presage a bright future. Without far-reaching aid measures and radical changes, it will be difficult, if not impossible, for these countries to get back on track.

2. Public External Debts in the Global South and Africa

Among the sectors requiring intervention, debt is central. In addition to its use as a tool for domination and transfer of wealth by the countries of the centre and the dominant classes over the peripheral states and the working classes, [3] acting positively on Global South countries’ debts would make it possible to immediately or even sustainably free up resources that are indispensable for emerging from the crisis.

Chart 1: Public external debt of the countries of the South, by type of creditor (in billions of US dollars) [4]

Orange: Multilateral debt; Yellow: Bilateral debt; Green: Private debt

Chart 2: Africa’s Public External Debt by Type of Creditor (US$ billions) [5]

Orange: Multilateral debt; Yellow: Bilateral debt; Green: Private debt

Between 2010 and 2018, Global South countries’ public external debts doubled, while that of African countries followed the same trend (see graphs 1 and 2). This spectacular increase is mainly due to a series of exogenous factors: the end of high commodity price levels beginning in 2013, a period known as the “super cycle” and the fall has worsened since then. The depreciation of currencies against the US dollar, the main currency of exchange. The recourse to issuing bonds, which have the advantage of not being conditioned to the implementation of specific policies at the cost of having high interest rates. Finally, the shock wave following the outbreak of the 2007-2008 financial crisis, which had the double effect of slowing down economic development and fueling the appetite of banks and private investors, attracted by the prospect of investing their substantial liquidities in the sovereign debt markets of Global South countries, which is riskier but also more profitable, at a time when financial markets in the North are moribund or even recessive. In fact, since 2010, Global South countries’ total revenue share of public external debt repayments has increased by 85 per cent, peaking at an average level of 12.2 per cent of government revenues, the highest level since 2004. [6]

Even though other internal factors contribute to the increase of this debt: lack of investment by States in infrastructure, in production units and in the processing of local resources; low tax revenues; embezzlement of public money; speculation on domestic public debt; corruption; clientelism, etc., they do not seem to explain the recurrence of the phenomenon. [7]

The dysfunctions of so-called democratic regimes and the monopolization of public resources by the dominant classes are not the preserve of African countries nor of other Global South countries. They reflect the very nature of the global economic system which we live in

Firstly, the dysfunctions of so-called democratic regimes and the monopolization of public resources by the dominant classes are not the preserve of African countries nor of other Global South countries. They reflect the very nature of the global economic system which we live in. Secondly, the weaknesses of the economies of the Global South can be explained less by allegedly incompetent States than by the systematic historical construction of mechanisms of domination over the vast majority of the world’s population by the so-called great powers and big money-makers. Conquests, colonization, trafficking, looting, unequal exchange, gunboat politics, the imposition of a set of cultural, economic, political and religious values external to the multiple modes of operation, customs and habits in question, are all part of the history of Global South countries over the last five or six centuries. Finally, the main international financial institutions (the World Bank, the International Monetary Fund, the Bank for International Settlements, the Inter-American Development Bank, the European Bank for Reconstruction and Development, and in some respects even the WTO, etc.) and the main informal groups (G7/8, G20, the Paris Club, the International Institute of Finance, [8] etc.) are all, without exception, dominated by the traditional and new imperialist powers (the BRICS, China in particular). Far from being a minor detail, these actors meet regularly and define the international financial architecture; destabilize or support geographical areas; draw up free trade treaties; decide on key interest rates, financial rescue or the abandonment of this or that financial or state actor; [9] draw up action plans and so-called development programs; impose structural adjustment plans and neo-liberal measures in the name of debt repayments. Without falling into conspiracy theory, this reflects the construction of an inequitable balance of power between the countries of the centre(s) and those of the periphery, between the 1% and the remaining 99%. In this confrontation, each one defends its own interests, political, economic and military, in order to derive maximum and immediate profit, to the detriment of the vast majority of the population. These actors are deliberately fueling global asymmetries and are in fact the main culprits behind the levels of development and indebtedness of the countries of the South.

3. From Macron’s false Debt Cancellation Declaration to Keeping Global South Countries under Domination

What about the “massive cancellation” of African debt declaration in all this might you ask? It fits fully into this system. The French state likes to remind (or convince) itself of its status as a major world power. It is true in many respects, it has significant political influence in all the institutions and informal groups mentioned above. However, its economic weight is declining, including in its traditional meadows, namely the countries it colonized, first and foremost in Africa. It knows that it is in competition with itself.

Alongside its historical rivals, Brazil, Russia, India, the Gulf States, and especially China, have significantly disrupted the interests of the French republic within and outside its borders. France is now “only” the continent’s 5^th largest economic trading partner, while China is in first place.

Through this communication operation, Macron would have put the French State and the Paris Club back at the centre of sovereign debt settlements, with the political and economic interests that this implies. It failed to do so

On the debt front, France holds 14 billion euros in debt claims on 41 African countries, i.e. less than 3% of the continent’s bilateral public external debt, [10] while China holds an estimated 20%. [11] Even if the French government were to cancel its debts completely, which is of course desirable, this would only have a very marginal impact on the debts of the African continent. Moreover, this statement by the French President was convincing only to those who believed in it, since France, as things stand at present, will never proceed to a unilateral cancellation.

France is one of the powers behind the creation of the Bretton Woods institutions, the IMF and the World Bank, two institutions that are today central in the management of sovereign debts. It was also behind the creation of the Paris Club in 1956, which currently brings together 22 countries and is hosted by the Paris-Bercy Ministry of Finance at taxpayers’ expense. In its 64 years of existence, the Paris Club has dealt with 434 sovereign debt restructuring operations, which is its function, in 90 different countries. [12] The problem is that, despite its predominant role, it has no legitimacy. On top of defining itself as a non-institution, it has neither a statute nor a charter and does not comply with any rule of law. It only responds to its six principlesr, including the “principle of solidarity”. [13] In short, no member country of the Paris Club can unilaterally carry out any operation aimed at alleviating the debt burden of a country that requests it. This cartel of creditors had the habit of calling the shots on the debts of the so-called developing countries. Operating in concert with the IMF, a very influential member of the Club, this vicious couple has been responsible for biased decisions and the imposition of neo-liberal measures and structural adjustment plans from the 1980s to the present day. The many criticisms leveled at it - illegitimacy, opacity, partiality, inefficiency - have not stopped tarnishing its reputation and the countries of the Global South have gradually distanced themselves from its clutches.

Once a majority shareholder, the Paris Club is relegated to the rank of one creditor among others. In 2007, the Paris Club held 50% of the bilateral debt of low-income countries. By 2018, that share had risen to well over 10%. At the same time, China’s share increased from 2-3% to over 25%. [14] Concerned, despite constant calls from the Club to join, this false ally of the countries of the South is still not a member. Thus, if France and the Paris Club really wanted to launch an initiative to “cancel” (we will come back to this later) African debts or more, they would no longer have a sufficient basis to impose it on other bilateral creditors, China in the lead. Likewise, since public external debt is now mainly in the hands of private creditors, the Paris Club would not have the weight to demand such an operation from them. It is no coincidence that UNCTAD has once again called for the creation of an international and independent mechanism for sovereign debt restructuring. [15] With the support of the IMF, the G20 and the IIF (International Institute of Finance) and aware of the power of influence in their hands, the members of the Paris Club have always been opposed to it.

It is in this context that Emmanuel Macron’s statement should be placed. By announcing a massive cancellation of African debts, he wanted to do double duty. Firstly, to put China to the wall by inciting it to cancel its debts. Secondly, if this were the case, China would then have every interest in finally joining the Paris Club and ensuring that its competitors align themselves on the same terms, according to another of the 6 principles of the Club, the “principle of comparability of treatment”. Through this communication operation, Macron would have put the French State and the Paris Club back at the centre of sovereign debt settlements, with the political and economic interests that this implies. It failed to do so.

4. Cancel the Debt, But Not In Any Odd Way

Including only low-income countries, 46 countries currently spend more of their resources on debt repayment (7.8% of GDP) than on health (1.8% of GDP). [16] This is the breath of fresh air that a cancellation of their debt would represent for the countries and populations of the South. But it is not so much the level of cancellation as the way in which it is done that matters to us. Emmanuel Macron is not the only one who skillfully uses words. The IMF, the World Bank, the G20, Heads of State, the media, all speak, wrongly, of debt cancellation.

It is not so much the level of cancellation as the way in which it is done that matters to us. Emmanuel Macron, the IMF, the World Bank, the G20, Heads of State, the media, all speak, wrongly, of debt cancellation

A cancellation is defined as taking all or part of the debt, including principal and interest, and replacing the amount to be repaid with a ’0’ in the transaction account. By cancelling, creditors are not reimbursed. This risk is known to everyone, which is why it is remunerated by the interest rate. In a way, capital is “destroyed” [17] and with it some of the influence in the hands of the creditors. Germany, Egypt, Ecuador, Jamaica, Namibia, Mozambique, Peru and Sierra Leone are some examples of countries that have benefited from a dry cancellation in the past. The option is both credible and possible. Debt relief or debt restructuring is a significantly different operation. A part of it, usually minimal, can be cancelled. At the same time, the remaining debt is rescheduled. The repayment period is then deferred (i.e. suspended) and/or extended; interest rates are renegotiated; or even refinanced through debt-for-investment swaps, where the creditor invests the debt it held in different sectors of the country concerned in different forms. In this second scheme, the populations of the debtor countries are not relieved of the debt burden. Only the part defined as unsustainable by the creditors is renegotiated, in order to avoid defaults on payments and to keep countries in difficulty under control. Trade treaties, specific investments, monopolies, the imposition of political measures and other blackmail can then be perpetuated.

Unsurprisingly, it is this second pattern that is favored by the international financial institutions and their representatives. Despite the critical situation, since the end of March 2020, the IMF and the World Bank have called for debt relief operations from bilateral creditors, without even applying the same discipline, no cancellation and no repayments required. Worse still, despite emergency financing, the majority is in the form of loans conditional on privatization and other neo-liberal measures. Private creditors have made no commitments and will consider relief only on a “voluntary basis”. As for bilateral creditors, the G20 announced a deferral of payments from May to December 2020 to the year 2022. Finally, these measures concern only 77 countries, representing 8% of the public external debt of the countries of the South. [18] In fact, behind the announcements, no cancellation but a deferral of payments of 3.6% of the debt of eligible countries. [19] There is therefore absolutely nothing to expect from them. They continue and will always continue to apply these principles.

5. For a United Front of the Global South Against Debt Payments

In order to avoid intimidation, reprisals and to extricate oneself from the debt system and the capitalist system, which are inevitable conditions for getting out of the mechanisms of domination, putting in place endogenous policies that respect the planet and allow people to decide for themselves, the time is right for the creation of a common front of the Global South countries against the payment of the debt

Failing cancellation, the countries of the Global South are in a position to suspend and repudiate debts. Historical examples [20] and arguments for doing so are not lacking. Cases of force majeure, states of necessity or fundamental changes in circumstances are recognized in international law. [21] They are fully applicable to the present situation. [22] Other arguments could be invoked as well. Illegal, odious, illegitimate debts, all these debts inherited from colonial times, dictatorial regimes, opaque contracts, without the consent of the parties, abusive conditionalities and/or the use of borrowed funds, can be repudiated as soon as their illegitimacy is proven. [23]

In order to avoid intimidation, reprisals and to extricate oneself from the debt system and the capitalist system, which are inevitable conditions for getting out of the mechanisms of domination, putting in place endogenous policies that respect the planet and allow people to decide for themselves, the time is right for the creation of a common front of the Global South countries against the payment of the debt. In 1985 and 1987, Fidel Castro in Cuba and Thomas Sankara in Burkina Faso had called on the States and peoples of the then ‘Third World’ to unite. At a time of multidimensional economic, financial, political, social and climatic crisis, the opportunity to act and finally reverse the balance of power in favor of the people of the world must be seized.

In order to ensure that these repudiations benefit the population, it is necessary to examine them by setting up citizens’ audits on public debt. To this end, it is essential to instill solidarity among peoples, through international mobilizations, and for populations to put the debt in the public debate, maintaining constant pressure on their leaders.