In the “Breakingviews” section at Reuters, our co-authors Shamshad Akhtar and Ulrich Volz write about the deceptive calm and misplaced optimism in debt markets. They point out the enormous hurdles that developing and emerging economies face in recovering from the COVID-19 pandemic and meeting key climate and development goals at the same time.
The Bretton Woods Project is a civil society network hosted by ActionAid. It envisions a global economic system that operates on the primary principles of justice, equity, gender equality, human rights and environmental sustainability, with international institutions that are democratic, inclusive, transparent, accountable, and responsive to citizens, especially the poorest and most vulnerable.
In a recent posting, it evaluates the G20 ‘Common Framework for Debt Treatments”. It starts with a quote from Gordon Brown’s speech at the launch of the report ‘Debt Relief for a Green and Inclusive Recovery‘: “despite the promises made by the G20, the IMF and the World Bank to stand behind them in their hour of greatest need,” the world’s poorest countries had “received only about a fraction of what they need in debt relief.”
Three main points summarise its critique:
- G20 announces disappointing common framework for debt restructuring
- Framework relies on much-critiqued IMF and World Bank debt sustainability analysis
- Debtor countries must agree to IMF treatment as condition of debt relief
Read yourself further on the website of the Bretton Woods Project.
The efforts to support low income countries (LICs) with unsustainable debt burdens do not go far enough, the DRGR authors Kevin Gallagher, Shamshad Akhtar, Stephany Griffith-Jones, Ulrich Volz and Moritz Kraemer argue in a text published on the online presence of the Italian Institute for International Political Studies (ISPI).
At “Project Syndicate”, the DRGR authors Shamshad Akhtar, Ulrich Volz, Moritz Kraemer and Stephany Griffith-Jones warn against dangerous shortsightedness in sovereign-debt restructurings and suggest steps for comprehensive debt relief oriented around a green, inclusive recovery.
Statement on Debt Relief for a Green and Inclusive Recovery
The COVID-19 crisis is the biggest threat to human prosperity and a healthy planet in close to a century.
As the world confronts a new wave of the COVID-19 virus, the United Nations reports that many developing countries are forced to deploy 30-70 percent of government revenues to pay off international creditors rather than pursue these broader goals.
The World Bank estimates that upwards of 150 million people could be pushed into extreme poverty by 2021, with 8 out of 10 of these ‘new poor’ in middle income countries.
This is not the time for nation-states to be forced to trade their people and futures for international debt repayments that have ballooned for reasons largely out of their control, putting action on our shared climate change and sustainable development goals on hold.
It is the time to reset and restart our economies in a new direction with inclusivity, climate and development goals at the core of the recovery effort.
To that end, we the undersigned call on the G20 and world leaders to provide debt relief to emerging market and developing countries with unsustainable debt burdens so they can secure fiscal space to combat the virus, protect the vulnerable, and secure a green and inclusive recovery.
We also support a substantial new allocation of the International Monetary Fund’s Special Drawing Rights, accompanied by a significant increase in multilateral and regional development bank financing aided by an increase in those banks’ capital. These measures are necessary to finance health, social protections and climate transitions for emerging market and developing countries in need.
We therefore call on the G20 to enact a Debt Relief for a Green and Inclusive Recovery Initiative that requires bilateral, multilateral, and private sector debt relief on a grand scale analogous to the Highly Indebted Poor Countries Initiative.
A G20 emergency summit on a Green and Inclusive Recovery in response to the debt crisis is overdue. We urge the Italian G20 presidency to initiate such a summit as soon as the Biden administration has come into office.
An unprecedented crisis requires an unprecedented response. It is time for G20 leaders to advance comprehensive debt relief and new financing to secure sustainable development and climate goals.
Marion Williams – former Governor of the Central Bank of Barbados
Atiur Rahman – former Governor of the Bangladesh Bank
Salehuddin Ahmed – former Governor of the Bangladesh Bank
Luiz Carlos Bresser-Pereira – former Finance Minister of Brazil
Nelson Barbosa – former Finance Minister of Brazil
Roberto Zahler – former Governor of the Central Bank of Chile
Jose Antonio Ocampo – former Finance Minister of Colombia
Hans Eichel – former Finance Minister of Germany
Patrick Honohan – former Governor of the Central Bank of Ireland
Y.V. Reddy – former Governor of the Reserve Bank of India
D. Subbarao – former Governor of the Reserve Bank of India
Rakesh Mohan – former Deputy Governor of the Reserve Bank of India
Njuguna Ndung’u– former Governor of the Central Bank of Kenya
Andrew Mullei – former Governor of the Central Bank of Kenya
Fazeel Najeeb – former Governor of the Maldives Monetary Authority
Sanusi Lamido Sanusi – former Governor of the Central Bank of Nigeria
Shamshad Akhtar – former Finance Minister of Pakistan and State Bank of Pakistan Governor
Oscar Dancourt – former Governor of the Central Bank of Peru
Jean-Paul Adam – former Finance Minister of Seychelles
Momodu Kargbo – former Finance Minister and Governor of the Bank of Sierra Leone
Rob Davies – former Minister of Trade and Industry for South Africa
Chalongphob Sussangkarn – Former Finance Minister of Thailand
Louis Kasekende – former Deputy Governor of the Bank of Uganda
Note: The statement was featured in the Financial Times
The COVID-19 crisis has come at the worst possible time for humanity. The poorest countries were already struggling to meet their development goals in the face of cyclones, wildfires, and droughts, and the world now has only a decade left to slow down increases in global temperature and sea levels before they become catastrophic, and invest in climate-resilient development.
Transcript of the video provided by Gordon Brown, United Nations Special Envoy for Global Education and former Prime Minister of the United Kingdom, for the launch of the report “Debt relief for a Green and Inclusive Recovery”
This conference today is of utmost importance, and in the month that we have found that we have an American president committed to net carbon zero by 2050 and a Chinese president committed to net carbon zero by 2060, this meeting is of great global significance as we fashion the new building blocks to take us there.
New report demands G20 to go beyond recent announcements and tackle the escalating debt, pandemic and climate crisis.
Public launch event on Monday, November 16, 2 PM GMT / 9 AM EST, with appearances from the Hon. Mia Amor Mottley, Prime Minister and Finance Minister of Barbados, and former UK Prime Minister Gordon Brown. Register to attend or Direct Livestream.
A report launched today calls on the G20 to move beyond the Common Framework for Debt Treatments announced last Friday and to require public and private creditors to provide a substantial debt cut to a broad set of low- and middle-income countries, in exchange for a commitment to use some of the newfound fiscal space for a green and inclusive recovery.