A group of organisations including Jubilee Debt Campaign, Oxfam and Global Justice Now are highlighting the $40 billion of debt payments due in 2020 from low-income countries, and calling for $300 billion of debt to be cancelled for the global south as a whole this year. The UN has called for up to $1 trillion of debt cancellation in total, as part of a range of measures to tackle the economic impact of coronavirus on the developing world.
Also, the G20 have committed to a suspension of debt payments for 77 low-income countries from 1 May to the end of 2020. This means $12 billion of debt payments will not need to be made this year. In addition, up to $500 million of debts to the IMF will be covered from a post-catastrophe trust fund, meaning 26 countries including Sierra Leone and Liberia will have some debt effectively cancelled.
The G20 also called upon private creditors to participate on similar terms, but they are not obliged to. The UK will be a key country for enforcing this, as a high proportion of international debt contracts are written under UK law, meaning our government could pass legislation to force private lenders to comply with the terms of an international agreement.
Jubilee Debt Campaign has calculated that $4.3 billion of foreign currency bond payments are due from May to December 2020 for the 77 countries, most of which is interest. In addition, they estimate a further $5.1 billion is due to be paid in less-transparent debt, making a total of $9.4 billion owed to private external lenders in the rest of 2020, by at least 46 of the 77 countries covered by the G20 deal.
In addition, Jubilee Debt Campaign has calculated that of foreign currency bonds owed by the 77 countries, 90% are governed by English law. This means that if borrowing governments comply with the G20 request and suspend debt payments to the private sector, they could face legal action in UK courts from any of the owners of their debt.
“No country should be forced to choose between paying a debt or providing healthcare in this time of crisis. The UK government can and must urgently pass legislation to prevent any country suspending debt payments due to the coronavirus crisis from being sued in London.
“The UK is the key jurisdiction for international debt contracts. The UK parliament has passed legislation in the past to protect poor countries from being sued by lenders who refuse to participate in internationally agreed debt deals. We need the Government to act now and update the law to prevent this immoral practice.”
Tim Jones. Jubilee Debt Campaign
There is a long way still to go. Only $0.5 billion of debt has been cancelled, out of the $40 billion minimum that we think is necessary. And the $12 billion of debt suspended will fall due after the end of this year, meaning a debt crisis has only been delayed, not avoided, for these countries.
In the short term, the campaign will be targeting the IMF, World Bank, and private lenders and trying to get them to join in with the debt suspension. Then it will be trying to get the debt suspension turned into debt cancellation. The UK will be a key country for this, as a high proportion of international debt contracts are written under UK law, meaning our government could pass legislation to force private lenders to comply with the terms of an international agreement.