G20, IMF and World Bank kick the can down the road and fail to deliver solutions to the worst debt crisis ever - CSOs react

24 OCTOBER 2024, WASHINGTON, D.C: This week G20 finance ministers, the IMF and the World Bank have again failed to take any meaningful action to deal with the deepening global debt crisis, continuing to term it ‘short-term liquidity challenges’. CSOs from across the world react with dismay at this failure.

Global south countries are being forced to default on human rights, the Sustainable Development Goals and the climate crisis - and a major reason is the unsustainable levels of debt payments. Domestic and external debt service is absorbing 42% of spending in all countries, and 55% in Africa. It is 2.7 times education spending, 4.2 times health spending and 11 times social protection spending.

The latest debt relief deals are insufficient and will leave the six countries that recently went through debt restructuring paying an average of over 20% of government revenue on external debt service. CSOs argue that what should be done is clear: cancel enough debt to bring countries back to a sustainable development path and reform the global debt architecture.

Jason Braganza, the Executive Director of the African Forum and Network on Debt and Development (AFRODAD) said: “The G20 Common Framework remains inadequate to solve Africa's debt crisis. It is a creditor-led and motivated initiative with the objective of guaranteeing creditors get paid. The Annual Meetings have failed to register meaningful progress in addressing the debt crisis in Africa, only skirting around whether it is a 'liquidity' or 'solvency' challenge. This bottleneck is forcing more countries to default on their national development as citizens pay the price through higher taxes and reduced public services. It is imperative to change this. An immediate reinstatement of a non-interest bearing debt service initiative is needed as a comprehensive debt restructuring process is developed."

Patricia Miranda, Global Advocacy Director at the Latin American Network for Economic and Social Justice (LATINDADD) said: "With debt service levels at the highest in at least three decades, governments in the global south are defaulting on climate and sustainable development to pay back their creditors. G20 countries, the IMF and the World Bank must stop dragging their feet and deliver on an effective debt cancellation scheme and reduce the debt burden in the Global South, ensuring that private creditors contribute with their fair share of debt relief."

Iolanda Fresnillo, Policy and Advocacy Manager at the European Network on Debt and Development (Eurodad) said: “Treating the current crisis as a liquidity challenge will do nothing more than kick the can down the road. The world needs new solutions that overcome the limitations of the G20’s Common Framework, offer real debt cancellation and advance towards a multilateral debt resolution mechanism to be defined by all borrowing and lender countries, on equal footing, under UN auspices, in a process to decide debt architecture reforms.”

Matthew Martin, Director of Development Finance International (DFI) said: “Governments are not defaulting on their debt service payments - they are instead defaulting on their development obligations to their citizens, and depriving them of their human rights. In 2025, governments of the global South will spend 47% of their budgets on debt service. This is more than they are spending on all core social services, and 45 times what they are spending on confronting the climate and nature crises combined. Without immediate widespread debt cancellation, the world’s citizens face another decade without development.”

Thea Grastveit, Debt Justice Norway said: “The G20, IMF and World Bank’s failure to act this week in Washington is damning. Many countries in the global south are cutting back public services and raising taxes to pay back private financiers in the global north. As a result, the sustainable development goals have become nothing more than a mirage, and while social unrest continues in Kenya and Argentina, private creditors take their money and run.”

Tim Jones, Debt Justice UK said: “The G20 and the Bretton Woods Institutions must not be allowed to hide their heads in the sand. They are currently repeating the mistake of the 1980s and 1990s, when the IMF and World Bank lent more money, which just bailed out private creditors. This resulted in two lost decades of development. When debt cancellation finally happened in the 2000s, a bigger share of that bill fell to the IMF and World Bank and donors’ taxpayers. We must cancel the debt now.”

Organisations endorsing this reaction include Oxfam International, erlassjahr.de (Jubilee Germany), Norwegian Church Aid and the ones mentioned above.

• According to UNCTAD, 3.3 billion people are living in countries that spend more on interest payments than on healthcare or education. This comes from A World in Debt report 2024 - which you can find here.
• You can find the latest (2024) numbers on the total debt service countries are paying, comparing them with spending on education, health, social protection and climate, in the Debt Service Watch briefing.(1)
• The recent briefing by Debt Justice UK ‘Analysing outcomes of debt restructurings’, shows how much creditors are profiting even after debt restructurings and how insufficient these are for countries with unsustainable debts.(2)

A new briefing from Eurodad lays out a blueprint to reform the global debt architecture under the auspices of the United Nations, following the failure of the International Monetary Fund, the World Bank and G20 to take meaningful action. Read the report here in English, French and Spanish.(3)