The burden of debt on the developing countries that amounts to over $11 trillion should be cancelled in view of the COVID-19 pandemic, a group of global notables has demanded.
Led by former Brazil President Dilma Rousseff the group says the debt should go in meeting the public health requirements in these challenging times.
“This debt has ballooned over the past several decades, leaving most developing countries in an unsustainable financial situation. Defaults and debt adjustments seem to be a permanent fixture amongst developing countries, coming for reasons that are often external to the fundamentals of their economies,” said the statement on debt cancellation.
Apart from Ms. Rousseff, the statement was also backed by former Greek Finance Minster Yanis Varoufakis and Argentine lawyer and activist Juan Grabois among others. The anti-debt group, which also includes Kerala Finance Minister T. M. Thomas Isaac, argues that the debt burden is preventing the developing countries from dealing with the pandemic in an efficient way, and therefore debt servicing should end enabling developing countries deal with the unprecedented challenge of the pandemic.
"Every dollar in debt servicing that goes to repay a bank, or a wealthy bondholder is a dollar than cannot go to buy a ventilator or for emergency food support. During the Corona Shock crisis, this is both morally indefensible and economically irrational," the anti-debt group said maintaining that debt postponement is not solution to the crisis and the actual solution to the problem lies in cancelling the entire debt amount.
The statement said the financial terms were opportunistic in nature which exploited the economic vulnerabilities of the developing economies.
The full text of the statement:
"By all accounts, developing country debt now stands at over US$11 trillion. In the remainder of 2020 itself, the debt servicing payments on this debt will amount to US$3.9 trillion. This debt has ballooned over the past several decades, leaving most developing countries in an unsustainable financial situation. Defaults and debt adjustments seem to be a permanent fixture amongst developing countries, coming punctually for reasons that are often external to the fundamentals of their economies.
"Austerity has become a permanent condition, which is what weakened the public health systems of so many countries and left them vulnerable to this global pandemic. To continue to service the debt and to be obliged by these debt burdens means that developing countries will not be able to efficiently and effectively tackle the pandemic, nor build the systems necessary for future public health emergencies.
"Debt suspension or postponement does not provide a foundation for the necessary development of these countries. It merely puts off the reckoning.
"It is time for the cancellation of these odious debts, which cannot – in any case – be paid during the coronavirus recession. Both public and private creditors took a risk with their investments. They exploited the needs of developing countries by lending money with obscene interest rates; it is time that they paid the price for the risk that they took rather than force countries with meager resources to pay out precious capital."
Dilma Rousseff (former President of Brazil).
T. M. Thomas Isaac (Finance Minister, Kerala, India).
Yanis Varoufakis (former Finance Minister, Greece).
Jorge Arreaza (Foreign Minister, Venezuela).
Fred M’membe (President, Socialist Party, Zambia).
Juan Grabois (Frente Patria Grande, Argentina).
Vijay Prashad (Tricontinental: Institute for Social Research).
