UK urged to take initiative to ease debt crisis in developing countries | Debt relief

UK urged to take initiative to ease debt crisis in developing countries |  Debt relief

Boris Johnson should use his G7 presidency this year to push for UK banks to join the global effort to ease a new developing country debt crisis, a campaign group has urged.

The Jubilee Debt Campaign (JDC) said there was a particular responsibility for Britain to act as it released new figures showing London-based banks were the biggest owners of debt issued by the poor countries.

With action taken in New York to ease debt restructuring, the JDC said the UK was now the most important country when it came to unlocking multilateral debt relief efforts.

World Bank President David Malpass has urged private lenders to voluntarily participate in a debt suspension program orchestrated by the G20 group of major developed and emerging countries, but so far none have signed up.

Questions and answers

What is the G7?


Meeting regularly since 1976, the G7 is made up of seven countries: Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. Between them, the countries account for about half of the world’s GDP, and the main purpose of the group is to provide a forum to discuss global economic stability. The first meetings grew out of a series of summits to deal with the 1973 oil crisis.

G7 summits are held annually, with the host country rotating among members. Summits are usually attended by leaders, finance ministers and central bank governors. In addition to the seven nations, the meetings are also typically attended by leaders from the European Union and representatives of international financial institutions, including the International Monetary Fund and the World Bank. In addition to high-level summits, G7 finance ministers meet regularly several times a year.

Between 1998 and 2014, the grouping was known as the G8 and also included Russia among its members. However, Russia was expelled in 2014 following the annexation of Crimea.

Martin Belam

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Tim Jones, policy manager for the Jubilee Debt Campaign, said: “It is unfair that private lenders continue to be paid in full while other lenders have suspended debt payments. Low-income countries spend $144 million [£102m] per day on debt payment.

“Private lenders must be brought into line with international debt relief efforts so that poor countries have the resources they need to weather and recover from the Covid crisis, and so that new multilateral actions on debt relief can be unlocked.As the country in the world with the greatest responsibility for private lenders, the UK must use its G7 Presidency this year to unlock private participation in debt relief debt.

JDC figures show that of the 73 countries eligible for debt relief under the G20 initiative – which was launched at the start of the Covid-19 pandemic – 30% of the debt was due to private lenders in the UK. In contrast, 18% was owed to Chinese private lenders and 7% to US companies.

So far, only three countries – Chad, Ethiopia and Zambia – have requested the new G20 common framework for debt restructuring, which requires debtors to request the same restructuring from private lenders as from governments. .

The JDC said the majority of debt payments from Chad, Ethiopia and Zambia went to private lenders, with 33% due to British companies, 23% to Chinese companies and 15% to companies. American companies. However, the G20 governments had not provided a mechanism for debtors to involve private lenders.

The campaign group said its figures relate to debt owed to private lenders other than bonds, which normally take the form of commercial loans. His previous research had however shown that 90% of the obligations owed by the countries eligible for the G20 initiatives were governed by English law, rising to 100% for the international obligations of Ethiopia and Zambia. Chad has no debt in the form of bonds.

The JDC calculated that in 2020 debt payments from developing countries reached the highest level since 2001, more than doubling from 6.7% of government revenue in 2010 to 14.3% in 2020. When the Covid crisis started, 64 countries were spending more on external debt payments. than on health care.

A Treasury spokesperson said: “The UK has been a long-standing supporter of low-income developing countries and recognizes the challenges they face as a result of the Covid-19 pandemic. Chairing his first meeting of G7 finance ministers last week, the Chancellor called on private sector creditors to play their full part in helping to secure sustainable debt treatments for the poorest countries, paving the way for real global recovery.

Robert P. Matthews