On World Health Day, amid an unprecedented global crisis, Financial Justice Ireland joined more than 100 organisations who are calling for developing country debt to be cancelled to fight the Covid-19 health and economic crisis. You can read the full statement here.
The economic turmoil caused by coronavirus is pushing indebted countries deeper into crisis. While millions are facing health and other impacts around the world, the economic impacts could spell disaster for countries in the global south. The cost of borrowing has gone up dramatically, and they are getting less money for products like copper and coffee, on which their economies depend.
Finanical Justice Ireland called on the Irish government to use its influence in the EU, the IMF and the World Bank, to;
- Cancel all debt payments for countries suffering from the economic impacts of coronavirus, due in 2020.
- Help countries in trouble to restructure their debt rather than bailing out lenders.
- Ensure new finance, granted to tackle the coronavirus, does not create more debt.
Cancelling all debt payments owed by low-income countries to other governments, multilateral institutions and private lenders would free up to US$ 25.5 billion to fight coronavirus in 2020 alone. Extending the cancellation to apply to payments due in 2021 would make another US$ 24.9 billion available to help save lives now and in the future.
The IMF and the World Bank have called for debt payments by the poorest countries to other governments to be suspended, but with the effects of the pandemic likely to last for years, delaying rather than cancelling payments won’t solve the problem.
Cancellation also needs to apply to all creditors, including bilateral, multilateral and private lenders, to ensure freed-up money goes to support the pandemic response, and not to pay off other debts.
Maeve Bateman, Director of Financial Justice Ireland, said:
“Millions of people in some of the world’s poorest countries are facing devastating health, social and economic crises as a result of the Covid-19 pandemic. Permanently cancelling upcoming debt payments owed by these countries would be the fastest way to free up existing public resources to tackle this unprecedented crisis and to save lives.
“The suspension on debt payments called for by the IMF and World Bank will fall short of this goal if it doesn’t apply to all lenders, and only postpones payments."
Sorley McCaughey, Head of Policy with Christian Aid Ireland [who have also signed the statement], added,
"Full cancellation of all external debt payments is critical, along with emergency finance that doesn’t add to debt burdens. This must be followed up with a more comprehensive and long-term approach to debt crisis resolution.”
As well as a cancellation of debt service, up to an additional US$ 73.1 billion 
of emergency finance will be needed to help low income economies as they respond to the crisis in 2020. This must be provided through grants, rather than loans, to stop recipient countries getting even deeper into debt. Addressing the long-term debt pressures on developing countries also requires decision-makers finally agreeing reforms to the international system for dealing with sovereign debt restructuring, once the acute Covid-19 crisis has passed.
A joint letter– signed by Financial Justice Ireland - was sent to governments and their representatives at the IMF and World Bank on 7th April. It calls for:
• The permanent cancellation of all external debt payments due in 2020 by developing countries, with no accrual of interest and charges and no penalties.
• The provision of additional, fresh emergency finance that does not create more debt.
• Debt cancellation and new financing to be provided free of demands for market-friendly and austerity-focused policy reforms in developing countries.
• Measures to be put in place to protect developing countries from lawsuits when ceasing 2020 debt payments.
• A process under UN auspices to be agreed in the longer term, to support systematic, timely, and fair restructuring of sovereign debt.
Organisations wishing to sign the statement can email maeve@financialjustice.ie.
About Financial Justice Ireland
Financial Justice Ireland (formerly Debt and Development Coalition Ireland) is a global financial justice organisation. They critically engage people to understand the structural causes of global inequality and power relations and aim to empower people in Ireland to take informed action for greater economic justice globally.
DSAI provides a platform for dialogue for development studies research, policy and practice across multi-disciplinary perspectives. This resource is published as part of COVID19 resource section; providing a space for pooling and sharing knowledge.