Above photo: Protesters from several organisations during the Debt For Climate Protest in Johannesburg on 14 October 2022. Gallo Images / Alet Pretorius.
Communities all over the world are struggling and resisting the impacts of multiple crises. At a time of intensifying climate impacts and speculative increases of food and energy prices, governments, particularly in the Global South, are responding to unsustainable public debts and the lack of development and climate finance, with a rising wave of austerity, subjugation and extractivism.
We vehemently denounce the role of the World Bank (WB) and the International Monetary Fund (IMF) that, together with other private and public lenders, perpetuate a flawed international financial architecture that exacerbates debt, climate, and economic crises, violating the basic needs and rights of millions of people and nature who have the least contribution, responsibility or control over these catastrophes. Together with the governments of the G7 and others in the global North that control these institutions, they must be held accountable for their historical responsibility in aggressively pushing loans even to corrupt and repressive regimes, and imposing harmful conditionalities that keep Global South countries debt-dependent and maldeveloped.
These institutions and governments continue to peddle their failed recipes despite their claim to promote global development and financial stability. Rather than advancing just, equitable and lasting solutions, they enable an endless cycle of suffering that generates enormous wealth for a global minority and pushes more and more people into increasingly abject poverty. Instead of delivering on their climate and development finance obligations, they are responding to increasing financing needs, by deepening the “Wall Street Consensus”: favoring debt-creating, market-based and private sector-privileging false solutions and thus, further promoting the financialisation of the global economy.
We call for Debt Justice
The Global South bears the burden of unsustainable and illegitimate debts, that undermine sovereignty, impede self-determination and deepen poverty, inequality and the loss of control over needed resources. The loan conditionalities, policies, and practices endorsed and promoted by the WB and the IMF facilitate the accumulation of unpayable and crippling debts and impose the prioritization of debt payments over human and nature rights, social welfare, sustainable development and climate action. Increasing debt payments and austerity packages are used to impose disastrous economic models that drain precious resources from essential public services and promote their privatization, trap countries in a cycle of debt dependency that hinders poverty eradication and sustainable development efforts and perpetuates systemic injustice.
The IMF has also refused to put an end to surcharges or the penalties that it levies on heavily debt burdened countries. It is estimated by the Fund itself that borrowing countries were charged over $4 billion in surcharges on top of interest payments and fees from the start of the pandemic up to end-2022. They include Pakistan, Ukraine, Jordan, Egypt, Gabon, Ecuador, Argentina, Albania, Tunisia and Mongolia, amongst other countries – all middle-income countries facing climate and debt distress but excluded from even minimal debt reductions by the G20/Paris Club debt “relief” schemes.
The illegitimacy of this debt burden is rooted in the historical realities of colonialism and slavery and the various mechanisms which perpetuate and reinforce global inequality. Seldom, if ever, have these purported debts benefited the peoples in whose name, but without whose consultation or consent, they were incurred.
They are tainted with corruption, violations of human rights, environmental destruction and a host of other harms to people and the planet. The debt crisis has not been acknowledged as a systemic crisis by the WB, IMF, G7 governments and other lenders as defaults are not yet posing a risk to financial markets in countries of the Global North. They fail to recognise that we are confronted with a systemic debt crisis in terms of human suffering in countries of the Global South. The consequence of not addressing the critical reality of debt domination in a fair and comprehensive way is leading to another lost decade for the rights and wellbeing of peoples and the planet, as well as hindering the possibilities of climate action in the global South. It allows the continued transfer of financial, economic, human and environmental resources from South to North and further sustains colonial legacies that manifest to this day in power asymmetries between North and South.
We call for Reparations and Restitution in response to the climate emergency.
The devastating consequences of the climate crisis hits impoverished communities hardest, even as they are the least responsible for global greenhouse gas emissions. Extreme weather events, rising sea levels, and resource scarcity, all exacerbate poverty and hunger, dislocate populations, and erode human rights, creating a grave threat to life and the sustainability of our planet. Like the debt crisis, the climate crisis is rooted in the plunder of the resources of the South, for which we demand reparations and restitution for the massive climate debt owed by the North.
Despite this, the WB and the IMF, together with the G7 governments that lead them and other private lenders, actively contribute to the perpetuation of the climate emergency through their historical and continuing support to economic models that have repeatedly shown their failure via the large scale increase of financial, social and ecological debt. This is particularly evident in their continued support for the fossil fuel sector. Both institutions claim that they are more climate-aware, and are moving away from fossil fuels towards supporting renewable energy, but this is belied by almost $15 billion poured into fossil fuel projects since the 2015 Paris agreement. At the same time, they are creating more lending facilities to cater to the private sector and de-risk their investments in climate action and energy transition.
More debt and profit-led private sector investment will neither deliver on the decarbonisation of global North economies nor cover the climate financing needs of the global south. These strategies are yet another example of the failure of rich countries to deliver grants-based climate finance, breaching the UNFCCC principle of “common but differentiated responsibilities”, which recognizes the global North’s responsibility for the climate crisis. Furthermore, without adequate debt cancellation, any scaled up lending from the IMF and World Bank, or the private sector, risks being used to repay existing creditors, a situation that not only fails to assist countries with financing their efforts to tackle the climate emergency but in truth, plunges them deeper in the debt trap.
We call for economic justice.
The IMF and World Bank, led by the G7 governments, have a long track-record of lending aggressively and irresponsibly for their own economic and geopolitical interests, showing no qualms in lending to Southern regimes that they very well know widely violated human rights, and contributed to corruption and the pursuit of narrow elite benefits. They should be held to account for ignoring the prime mandate of governments to protect the public interest, for failing to rigorously exercise due diligence, including undertaking investigation and monitoring of the financial, social, environmental impacts of their debt-funded funded projects.
They also push neoliberal reforms that dismantle social safety nets, privatize essential services, push for regressive taxes, erode labor protections and roll back the regulatory and developmental role of the public sector, resulting in widespread economic insecurity and worsened inequality. The loan conditionalities that include the privatization of water and other essential services constrained the access of low-income communities and exposed them to greater health risks during COVID-19. These IFIs further undermine the economies and livelihoods in the Global South by rendering them vulnerable to global financial shocks and volatility of commodity prices.
Despite the detrimental impact of these policies, the WB and the IMF continue to act on the basis of their own impunity, promoting market-based approaches that prioritize private finance to tackle the developmental setbacks since the pandemic started. This approach exacerbates inequality, perpetuates economic disparities, and fails to deliver inclusive and sustainable economic growth. The financial architecture endorsed by these institutions enables the accumulation of wealth by the few at the expense of the many, perpetuating a system that prioritizes profit over human well-being and undermines all attempts to secure justice for affected peoples and the planet.
Our Urgent Demands
We call on the IMF and World Bank, all governments North and South, and private financial actors to act now to ensure urgently needed and real reform of the international financial architecture alongside undertaking systemic solutions that include building post-carbon societies and economies where financial, food and energy sovereignty are a reality.
- Immediate and unconditional external debt cancellation for all countries in need from all lenders, starting with the cancellation of illegitimate debts, in order to fulfill the universal human rights obligation to create an international economic order that enables all countries to deal with the multiple crises and comply with the rights of their peoples and the planet.
- Cancellation of external debt for low- as well as moderate-income countries and communities, and ensuring that all lending policies and safeguards of the IMF and other international financial institutions give primacy to human rights obligations and environmental protections and provide accessible mechanisms for popular redress and reparations.
- 3. International and domestic legal frameworks to stop the accumulation of unsustainable and illegitimate debts, offer fair and comprehensive solutions to debt crises and ensure sanctions and reparations for those responsible for the crimes and human rights violations committed through the system of perpetual indebtedness. Among other elements, this might include:
- A new multilateral debt resolution framework under UN auspices, rather than lender-dominated processes, that addresses unsustainable and illegitimate debt
- A new approach to debt sustainability that has the financing needs for the Sustainable Development Goals, climate, and gender equality at its core and recognizes the primacy of human and nature rights obligations.
- Legislation to make it mandatory for private lenders to participate in debt cancellation
- Legislation to end the predatory action of vulture funds
- Binding principles on responsible lending and borrowing that put an end to lending that leads to the exploitation of peoples and destruction of the environment
- Genuine participatory, inclusive debt transparency and accountability mechanisms and processes, including national debt audits
- The immediate delivery of new, additional and non-debt creating climate finance for adaptation, mitigation and loss and damage, far beyond the unmet $100 billion/year pledge, that adequately meets the needs of the Global South
- The immediate delivery of new, additional and non-debt creating climate finance for adaptation, mitigation and loss and damage, far beyond the unmet $100 billion/year pledge, that adequately meets the needs of the Global South.
- Recognition of the existence of a climate debt, additional to a historical, financial, ecological and social debt, that the global North owes to the global South. This recognition should lead to structural and financial reparations, as well as ecological restoration, phasing out fossil fuel subsidies, ending extractivism, and shifting to decarbonized modes of production, distribution and consumption.
- Democratize sovereign lending and borrowing processes by ensuring transparency, accountability and representation. States must also be held accountable for debt decisions and expenditures which often end up benefiting the private sector and corporations at the expense of human rights and public and planetary welfare.