The ongoing burden of debt payments during the COVID-19 pandemic means that many countries are diverting vital resources away from meeting the urgent needs of their citizens – medicine, food, housing, education – in order to pay their debts to international financial institutions. If this goes on, millions of people will fall into poverty, hunger, illness and death.
The current short-term debt relief offered by the World Bank and IMF to low-income countries doesn’t match the scale of the concurrent health, economic, climate, and biodiversity crises. New finance is insufficient to respond to the crisis, let alone tackle the climate crisis and rebuild our common home.
President Biden can play an important role in changing the terms of debate and applying diplomatic and political pressure at key meetings in 2021 of the G20 Finance Ministers, at the United Nations, World Bank, IMF and United Nations.
Here are immediate next steps for addressing this emerging crisis:
1. Cancel debt payments. G20 governments need extend their debt relief commitments to more countries and for much longer. The World Bank and IMF need to offer much greater debt relief and the IMF should sell a percentage of its gold reserves to enable this.
2. End preferential treatment for the private sector. G20 and G7 countries need to ensure private creditors stop requiring debt payments and that they participate in discussions on long-term debt relief and restructuring. This is likely to require legislation, particularly in the U.S. (New York) and UK (London), where most private creditors are listed.
3. Offer new finance without conditionality. G20 governments and the IMF need to agree a new and large issuance of Special Drawing Rights (SDRs), which can provide finance for COVID-19 response and recovery. There is likely to only be one opportunity for this during the next decade.
The immediate priority for all countries is to save lives and support livelihoods through measures such as healthcare provision, the distribution of vaccines, and social safety nets for those who have lost their jobs and income. In the long-term, the challenge is to rebuild societies and economies that put the needs of the poorest people first and care for our common home.
Debt relief is essential for surviving this moment. Take action today.
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