The process for suspending debt repayments by distressed countries must change, to promote growth in the poorest countries, said Adama Coulibaly, chair of the G-24 and minister of economy and finance for Côte d’Ivoire.
While the G20 Common Framework for Debt Treatment had been a success, he said, it was important for policymakers to improve it further. “The Common Framework has worked, it hasn’t failed — but for it to be more effective all creditors should be convened around the table so that a solution can be implemented as effectively as possible.”
Suspension programmes or even debt cancellation for the poorest African countries would help them find growth and focus on development where it was needed most, he said.
“Addressing the issue of mounting debt, we call for immediate global actions to assist developing countries in managing their escalating debt vulnerabilities,” said Coulibaly. “We call on debt cancellation for the most vulnerable and poor countries, most of whose debt is owed to the MDBs.”
US treasury secretary Janet Yellen said debt posed risks to development and financial sustainability. “When Ghana sought an IMF programme and debt treatment under the Common Framework last year, a shocking 47% of government revenues were going to service debt,” she said. “These were funds that were unavailable to invest in preventing the next climate shock or strengthening health systems.”
Unfair choices
Sosten Gwengwe, Malawi’s former finance minister, said it created problems when a country could not spend its resources on helping people who are suffering and need support. “We need the [World] Bank to help us to bounce back quicker,” he said. “[It] has been very supportive but could help us a little more.
“What would help us most in freeing resources to resilience [and] mitigation would be the issue of debt service suspension, not full-blown cancellation,” he added. “Debt service is a commitment to past sins; you are under obligation to sins of the past. We need fiscal space on the debt issue to allow us to re-channel our resources. This discussion should be taken seriously, otherwise we have no buffer and whatever hits us eats into our fiscal position.”
Instead of prioritising the neediest, African countries have often had to put debt service first to avoid default and losing access to international markets.
Gwen Hines, CEO of Save the Children, UK, said she had been “struck by the choices countries have to make. We see it all the time: do they invest in education, do they invest in healthcare or do they service their debts?” she said. “That is a horrible choice to have to make, I cannot say that enough. It is an unfair choice.”