😟 Low-income Countries: Debt Cancellation

• Debt Cancellation Campaigns: The debate opened with a reflection on the success of the Jubilee 2000 campaign, which resulted in $130 billion of debt cancellation for 36 low-income countries between the late 1990s and early 2000s. This allowed these countries to invest more in health, education, and other public services.

• Current Debt Crisis: The problem of debt in low-income countries has worsened over the years. In 2023, these countries spent a record $1.4 trillion servicing foreign debts, with interest payments soaring by nearly a third to $406 billion. This has forced many to cut essential services like health and education.

• Role of Private Creditors: A major challenge identified is the increasing involvement of private creditors, such as hedge funds and investment banks, now holding 61% of global sovereign debt. These creditors often impose harsher terms and conditions, exacerbating the debt burden on low-income countries.

• Legislative Action Proposed: Several speakers supported legislative changes to compel private creditors to participate in debt relief agreements, similar to the Debt Relief (Developing Countries) Act 2010. This was contrasted with views arguing against unilateral debt cancellation, emphasizing the need for broader reforms.

• Global Debt Frameworks: The G20 common framework for debt treatments was discussed, but criticized for its inefficacy in some cases, particularly due to private creditors’ reluctance to agree to debt relief. Only four countries have sought relief under this framework to date.

• Human Impact: Speakers highlighted the severe human cost of ongoing debt burdens, such as increased infant mortality rates and under-investment in education, which can lead to a less skilled and productive workforce, trapping countries in poverty cycles.

• Climate and Debt: The intersection of climate vulnerability and debt was raised, with calls for automatic debt cancellation during climate-related disasters to allow affected countries to focus on recovery rather than debt repayment.

• UK’s Role: The UK’s potential to lead on international debt relief was mentioned, given that 45% of sovereign debts are governed under English law. The debate emphasized the need for the UK to continue its role as a leader in international development and debt relief.

• Charitable Contributions: MPs acknowledged the significant role of charities and faith-based organizations in aiding low-income countries, alongside governmental efforts.

• Future Actions: The Economic Secretary to the Treasury outlined the government’s three-pronged approach: addressing liquidity challenges, ensuring effective debt restructurings, and promoting debt resilience. This includes supporting the IMF and World Bank’s efforts and engaging private creditors to participate more fairly in debt relief processes.

The session on ‘Low-income Countries: Debt Cancellation’ demonstrates a moderate level of disagreement among the participants. The disagreements are primarily related to the approach and mechanisms for addressing debt cancellation, rather than the core issue itself. Here are the key points of disagreement and consensus that contributed to the rating:

1. Consensus on the Issue: There is a clear and strong consensus among all participants that debt cancellation for low-income countries is necessary and urgent. This is evident in the way every speaker, from Bambos Charalambous to the Minister Emma Reynolds, acknowledges the significant burden that debt imposes on low-income countries and their development.

2. Disagreement on Legislation for Private Creditors: A significant point of disagreement arises on the role and regulation of private creditors. Bambos Charalambous advocates strongly for legislation to compel private creditors to participate in debt relief, highlighting examples of non-cooperation from private entities like Glencore and their detrimental effects on countries like Sri Lanka and Zambia. In contrast, Minister Emma Reynolds expresses skepticism about the need for such legislation, stating that she has not seen evidence of private creditors refusing to participate and emphasizes ongoing engagement with them. This disagreement is a notable point of contention, showcasing different views on how to manage private sector involvement in debt relief.

3. Disagreement on Colonial Reparations: Another notable disagreement is related to the issue of colonialism and reparative justice. Bell Ribeiro-Addy connects debt cancellation to a broader framework of reparative justice, arguing that historical injustices, including colonialism, have contributed to the current debt crisis. In response, Andrew Rosindell expresses reservations about linking debt relief to historical colonialism, suggesting that such an approach could be divisive and counterproductive. This disagreement, while tangential to the main issue of debt cancellation, highlights differing views on the broader context within which debt should be addressed.

4. Differences on Economic Measures and Fiscal Responsibility: There is a divergence in opinion on the necessity of fiscal responsibility measures tied to debt relief. Andrew Rosindell emphasizes the importance of implementing sound economic policies and tackling corruption in recipient countries as a condition for debt relief, arguing that this is essential for long-term sustainability. In contrast, other speakers, including Bambos Charalambous and Dr Jeevun Sandher, focus more on the immediate relief from debt without necessarily pushing for fiscal conditionality, showing a difference in the emphasis on strategic economic planning.

5. Agreement on International Collaboration: There is a strong agreement on the need for international collaboration and the role of institutions like the G20 and IMF in addressing the debt crisis. This alignment is evident across all contributions, particularly in the discussions around the common framework and the need for more effective and timely debt restructuring mechanisms.

Overall, the disagreements observed are significant but specific to certain aspects of the broader issue, such as the regulation of private creditors, the link to colonial reparations, and the necessity of economic conditions attached to debt relief. The majority of the session is characterized by a shared urgency and common goals, warranting a rating of 2 for moderate disagreement.