G20 debt suspension decision will bring temporary relief but offers no lasting solution to debt crisis
This morning, the G20 governments announced they have agreed to temporarily suspend debt for the world's least developed countries in response to the COVID-19 crisis.
The suspension covers debt payments by 77 countries to G20 and other governments from 1 May to the end of 2020, estimated to be $12 billion. The payments will not be cancelled but are due to be paid between 2022 and 2024, along with interest accrued in the meantime. There will be a review before the end of 2020 as to whether further action will be taken.
The G20 announcement also calls on private creditors to similarly suspend debt payments and for multilateral creditors to explore options for doing so.
Dr Luke Fletcher, Executive Director of Jubilee Australia said, "The G20's announcement gives struggling countries some temporary relief, but it will not help countries at risk of a debt crisis in the long-term as they will have to pay the money back later. To support low-income countries globally to respond to the scale of the COVID-19 pandemic and the economic fallout, the G20 needs to move to immediate debt cancellation.
"While welcome efforts have been made to include all creditors in the G20 agreement, it is also vital that the World Bank builds on the IMF and G20 actions by cancelling all 2020 payments developing countries owe the bank. Beyond inviting the private sector to participate, governments must also take steps to ensure freed-up resources from official debt relief aren't used to pay off other debts. This involves exploring legal protections for developing countries from lawsuits for missed payments to private lenders, such as standstills on creditor litigation in key jurisdictions."
Data from ActionAid's new global report, Who Cares for the Future: Finance and gender responsive public services outlines how countries such as Ghana spend almost three times as much on foreign debt repayments ($4.1 billion, 59% of GDP) compared to health ($1.3 billion). A debt cancellation would enable Ghana to double its 115,650 health workers and still have $1 billion left over to support social protection for workers hit by the economic crisis and education.
Michelle Higelin, Executive Director of ActionAid Australia said, "Many countries in Asia-Africa and the Pacific are facing a triple threat from coronavirus, an economic recession, and the climate crisis. Women and girls are already among the most impacted by job losses, increases in unpaid care and inadequate social protection.
"In Vanuatu, there are only two ventilators for a population of more than 250,000 leaving the country ill-equipped to fight COVID-19. Meanwhile Tropical Cyclone Harold made landfall last week causing widespread destruction in a country still recovering from the devastating impacts of Cyclone Pam in 2015.
"The IMF has warned that we face the worst economic fallout since the Great Depression. The Australian Government must work with the international community to find lasting solutions to this unprecedented crisis and avert a deepening of poverty and gender inequality."
This statement has been prepared on behalf of: ActionAid Australia, Jubilee Australia, Aid/Watch, Caritas, and Australian Fair Trade and Investment Network.
Last week we along with a number of other civil society organisations including wrote to Treasurer Josh Frydenberg calling for Australia to work with the International Monetary Fund, World Bank, Paris Club, and G20 to cancel debt for the most vulnerable countries.
ActionAid is a global women's rights organisation supporting women living in poverty and exclusion around the world to stand up against injustice and claim their rights, with a focus on economic justice, climate justice and women's rights in emergencies.
Jubilee Australia engages in research and advocacy to promote economic justice for communities in the Asia-Pacific region and accountability for Australian corporations and government agencies operating there.