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Voice of Belady
03-08-2025
- Business
- Voice of Belady
Eleven remedies for debt crisis
Solutions to the debt crisis of the world's developing countries need to be practical and implementable if they are to have the desired effects, writes Mahmoud Mohieldin Last month, the Vatican hosted a conference to launch the Jubilee Report on tackling the debt and development crises commissioned by the late Pope Francis and based on work led by Nobel Prize-winning economist Joseph Stiglitz. During the event, an important question was raised: are the debts accumulated by developing countries intended for production or consumption? The point of the question was that loans to finance investment are more likely to be repaid from the returns, whereas loans for consumption or non-productive sectors are effectively money down the drain, because they yield no returns. In fact, for many developing countries, the situation has reached a point where they are taking out new loans merely to cover the burdens of old ones. These new loans neither contribute to financing investment for production nor to cover consumption expenses. This is a salient feature of the silent global debt crisis, which has trapped borrowers in a cycle of indebtedness. The amounts many countries now have to earmark for debt-servicing payments exceed their budgetary allocations for education and healthcare combined. To make matters worse, the interest payments alone have nearly doubled over the past ten years. It is as though these countries have chosen not to default on their debt repayments at the expense of defaulting on their development goals. Multiple actors have had a hand in producing this crisis. The developing economies adopted strategies of borrowing at a time of low interest rates but did not take the necessary precautions against interest rate hikes, currency fluctuations, or short maturity periods. Instead of relying so heavily on borrowing, with its attendant obligations and risks, these countries should have balanced their budgets, marshalled domestic resources, and readjusted their growth models with an eye to greater reliance on private investment in areas where it performs well and generates profits and, hence, taxable revenues. In particular, they should have encouraged private investment in infrastructure and energy projects, which account for the bulk of their financing needs. As Columbia University professor and former Argentinian economy minister Martín Guzmán has been reminding us that creditors also bear responsibility for the current crisis. They are the ones who extended loans while fully aware of the significant risk of default and charged inflated interest rates to compensate for that risk. Later, when these risks materialised, the creditors were reluctant to provide the relief needed to restore debt sustainability. Nor are the international financial institutions blameless. They contributed to the slow pace of debt-restructuring negotiations between creditors and debtors. They also tolerated the diversion of long-term concessional financing to repay the private sector debts of countries on the brink of default, which meant diverting it away from the development purposes for which it was intended. It is vitally important to formulate effective debt-management procedures based on several factors. First, they should distinguish between cases involving liquidity shortages and those on the verge of actual insolvency. Second, they need to take into consideration the debt structure and nature of the creditors (public or private sector). Third, the dangers of debt are not limited to low-income countries, as middle-income countries are also affected. Of the 54 African countries, 31 are middle-income. These were among the main factors looked at by a task force appointed by UN Secretary General António Guterres to develop practical solutions to the debt crisis. It included former South African minister of finance Trevor Manuel, former prime minister of Italy Paolo Gentiloni, Boston University professor Yan Wang, and the author of this article. We appreciate the fact that, for the proposed solutions to achieve their intended benefits, a solid scientific underpinning was a necessary but not a sufficient condition. They also had to be practically implementable, especially given the current international geopolitical disruptions. The group arrived at the following proposals, which are divided across three levels. On the level of the global financial system, the task force recommended increasing financial support for World Bank and International Monetary Fund (IMF) specialised mechanisms and funds that provide liquidity and debt relief for both middle- and low-income countries; reforming the G20 Common Framework for Debt Treatment to include middle-income countries, suspend debt repayments during restructuring, shorten negotiation periods, and stimulate private sector participation through the IMF's lending mechanisms in cases of arrears; introducing a balanced approach to suspending debt-servicing obligations during crises and shocks that undermine a debtor's repayment capacities; reviewing the debt sustainability analyses conducted by the World Bank and IMF for both low- and middle-income countries; and redirecting unused Special Drawing Rights (SDRs) to inject liquidity, repurchase debt, and strengthen the financing capacities of international development institutions. On the level of international cooperation, especially among countries of the Global South, the task force recommended establishing a centre for information sharing, technical assistance, financial innovation, and advice on debt swap mechanisms; creating a borrowers' forum for the purposes of consultation, coordination in international platforms and organisations, and strengthening institutional capacities; and enhancing the capacity of debt management units. On the level of country-level proposals, it recommended strengthening institutions and policies to manage liquidity, exchange rates, and interest rate risks that would include tighter safeguards to promote borrowing in local currency; improving the quality of projects seeking to attract investment and introduce specialised platforms for mobilising domestic and international resources; and reducing the costs of financing and transactions related to debt swaps and financial innovation instruments, which should be systematically linked to public policies and development plans, thereby relinquishing an ad hoc deal-making approach. To achieve these proposals' intended purpose – relieving existing debt burdens and preventing future crises – they must be implemented effectively within the framework of the financial commitments that are currently being discussed in Seville at the Fourth International Conference on Financing for Development.
Arab News
02-08-2025
- Business
- Arab News
Africa's debt crisis demands self-reliant solutions
The much-discussed Jubilee Report, emerging from expert deliberations commissioned by the Vatican, diagnoses the acute debt distress strangling developing economies, particularly in Africa, with commendable clarity. It presents a familiar litany of systemic failures: pro-cyclical capital flows, creditor-friendly legal architectures in New York and London, the inadequacy of debt sustainability analyses, and the perverse incentives perpetuated by international financial institutions. Its prescriptions, including a new heavily indebted poor countries initiative, legal reforms to curb predatory litigation, shifts toward 'growth-oriented austerity,' and massive increases in multilateral financing, echo decades of expert consensus. Yet, a fundamental flaw remains. The report's prescriptions rely on coordinated global goodwill and structural reform that is demonstrably absent in today's fragmented world. For Africa, where public debt has outpaced national economic growth since 2013, and home to 751 million people in countries spending more on servicing external debt than on education or health — waiting for this global consensus is not strategy; it is surrender. The report's morally resonant idealism dangerously underestimates the entrenched hostility to meaningful concessions benefiting African economies and overlooks the imperative for radical, self-reliant solutions. Consider the sheer scale of the crisis versus the proposed global fixes. A total of 54 developing countries now allocate over 10 percent of public revenues merely to interest payments. In Africa, this fiscal hemorrhage directly competes with existential needs: costly climate adaptation for countries contributing minimally to emissions, yet facing devastating impacts, and investment in a youth population projected to reach 35 percent of the global total by 2050. The report rightly condemns the injustice, historical and ongoing, embedded in this dynamic. However, its central remedy, a heavily indebted poor countries initiative, requires unprecedented cooperation from diverse and often adversarial creditor blocs: traditional Paris Club members; newer bilateral lenders such as China; and, crucially, private bondholders who now dominate over 40 percent of low and lower-middle income country external debt. Regardless, historical precedent does not inspire confidence. A predecessor heavily indebted poor countries initiative, while delivering relief, failed to prevent recurrence precisely because it did not alter the fundamental dynamics or the structure of global finance. Why expect a sequel, demanding even greater concessions from powerful financial interests operating within unreformed legal jurisdictions, to succeed now? The Common Framework, hailed as progress, has delivered negligible relief precisely due to creditor discord and obstructionism. Betting Africa's future on such actors suddenly developing a collective conscience is not realism; it is negligence. Additionally, the report's reliance on international financial institutions as engines of reform and finance is equally problematic. It calls for an end to International Monetary Fund bailouts of private creditors; lower surcharges; massive SDR, or Special Drawing Right, reallocations; and transformed multilateral development bank lending models. Yet, the governance structures of these institutions remain frozen in mid-20th-century power dynamics that remain heavily skewed against African representation and influence. For instance, securing a $650 billion SDR allocation during the pandemic proved a herculean task; achieving the regular, larger, and equitably distributed issuances the report envisions, given rising fiscal nationalism and escalating geopolitical rivalries, seems quixotic. Moreover, the notion that these same institutions, historically enforcers of austerity and guardians of creditor interests, can reinvent themselves as champions of unconditional, mission-driven finance for African transformation ignores their institutional DNA and the political constraints imposed by their major shareholders. Meanwhile, the call for MDBs to lend massively in local currencies, while technically sound for reducing exchange rate risk, faces fierce resistance from bond markets and rating agencies wary of currency volatility, effectively limiting its scale without improbable capital increases. Furthermore, the report's focus on grand interventions, from debt buyback funds and global climate funds to international bankruptcy courts, fails to grapple with the toxic geopolitical environment. Historical prejudices framing African governance as inherently corrupt or incapable, combined with rising great power competition, actively work against complex cooperative frameworks perceived as primarily benefiting African countries. Solutions built on African agency, regional cohesion, and financial self-reliance offer a more realistic path out of the debt trap. Hafed Al-Ghwell In addition, resources for global funds are notoriously scarce and fiercely contested; establishing new international legal architectures faces veto points at every turn. The current global context is not merely indifferent to African debt distress; elements within it are actively hostile to solutions requiring hefty financial transfers or perceived concessions of leverage. Waiting for this hostility to abate condemns Africa to prolonged debt traps, draining precious reserves crucial for the continent's 1.4 billion people and, ultimately, global stability. The path forward, therefore, demands a harsh pivot toward solutions Africa controls, minimizing reliance on external mobilization vulnerable to global whims. This is not isolationism but pragmatic self-preservation. It requires, for instance, aggressively developing domestic capital markets. Africa's savings, estimated in the trillions of dollars collectively, are often parked in low-yield advanced economy assets or leave the continent entirely. Redirecting these resources requires efforts to deepen local bond markets, strengthen regulatory frameworks, and incentivize institutional investors to allocate capital locally. Second, the report mentions implementing strategic capital account regulations, but underplays their centrality. African countries must actively deploy tools, from reserve requirements to taxes on short-term inflows and prudential limits on foreign currency exposure, to break the pro-cyclical boom-bust cycle of capital flows. This shields fiscal space and reduces vulnerability to the monetary policy shocks emanating from advanced economies. It is a tool of sovereignty, not retreat. Third, strengthening mechanisms such as the African Monetary Fund and expanding regional swap arrangements is critical for building robust regional financial safety nets. Pooling reserves and establishing regional payment systems, thereby reducing dollar dependency for intra-African trade, can provide vital liquidity during crises without the conditionalities of the IMF. This demands unprecedented political will for regional integration and also offers a tangible buffer against global volatility. Fourth, every new infrastructure project financed in dollars increases future vulnerability. Negotiating harder for local currency loans from remaining bilateral partners and MDBs, even at marginally higher initial rates, is essential. Simultaneously, investing in credible monetary policy frameworks is nonnegotiable to sustain this approach. Lastly, transparency and robust domestic oversight of borrowing, including contingent liabilities from public-private partnerships, are vital to prevent repeating past mistakes. Building domestic technical capacity for sophisticated debt sustainability analyses, independent of existing models often blind to climate vulnerability, strengthens negotiation positions. Ultimately, the diagnoses are accurate — there is no argument there. However, the prescribed medicine is simply a dose the global pharmacy refuses to dispense. Africa's debt crisis, crippling distressed countries and suffocating the futures of 288 million people in extreme poverty, cannot await a global kumbaya moment. The moral imperative remains, but the strategic response must shift. Solutions built on African agency, regional cohesion, and financial self-reliance, however difficult, offer a more realistic, and ultimately, more dignified path out of the debt trap than persistent reliance on a system structurally biased against the continent's development.
Bangkok Post
02-07-2025
- Business
- Bangkok Post
Resetting development finance
At the Fourth International Conference on Financing for Development this week in Seville, delegates are calling for urgent action to fix a system that has stopped working. Prior to the third such gathering a decade ago, in Ethiopia, we had witnessed unprecedented advances towards reducing poverty, increasing school enrolment, and providing clean water worldwide. Today, however, progress is not only slowing but potentially stagnating -- or, worse, reversing. Global growth this year is expected to slow to its lowest rate (outside of a crisis) since 2008. The outlook is especially problematic for developing countries that are already growing well below historical averages, and for those 35 countries, mostly in Africa, that are already in or at high risk of debt distress. One out of every three countries now spends more repaying creditors than on health or education. As debt payments crowd out money needed for development, these countries' futures are being jeopardised. Meanwhile, the global gap between the richest and the poorest continues to grow, with Oxfam estimating that the new wealth of the top 1% surged by more than US$33.9 trillion since 2015 -- enough to end poverty 22 times over. The situation won't change unless there are greater flows of finance to developing countries. Moreover, quality matters as much as the quantity: There has been far too much finance of the kind that leads to financial distress, and far too little of the kind that promotes sustained growth. We believe that finance for development is too important not to involve every stakeholder. As the late Pope Francis emphasised, doing so is a moral obligation. That is the message of the Vatican's new Jubilee Report on debt, reflecting the work of a global commission of experts -- which one of us (Stiglitz) chaired. But fixing development finance is also a matter of self-interest for most advanced economies. After all, poverty and inequality give rise to social tension, diseases, and conflicts, with spillovers that do not respect national boundaries. Moreover, a lack of finance in developing countries implies a lack of investment in climate-change mitigation, a global public good that is necessary for everyone's future prosperity. With the world so divided, and so afflicted by the exercise of raw power and by short-term thinking, the Seville conference should be seen as an opportunity to renew multilateralism for the common good. But it will need to be more than just an exercise in speech-making about the hope of a better future. Such rhetoric must be translated into tangible progress, and there are some signs that this could happen. The outcome document, the "Compromiso de Sevilla", forged at the United Nations in New York, gives us confidence that this gathering will lay the foundation for a new debt and financial architecture. Specifically, Spain has launched the Sevilla Platform for Action, providing a comprehensive framework for coalitions of the willing to advance ambitious, but feasible, initiatives that will drive material progress in addressing challenges related to sustainable development. For example, we should see the launch of a Global Hub for Debt Swaps to generate more fiscal space for investment in sustainable growth; a Debt Pause Clause Alliance, to ease pressure on vulnerable countries' budgets when they are squeezed by extraordinary events; a broad push to re-channel International Monetary Fund special drawing rights (SDRs) -- the IMF's global reserve asset, held mostly by wealthy countries -- towards more effective uses; steps to strengthen the voices of debtor countries through a borrower-country platform; and the start of an intergovernmental process on debt restructuring at the UN, following principles that were already agreed by an overwhelming majority of member states a decade ago. These steps represent just the start. In time, the Seville conference could be remembered not as a landing zone, but as a launchpad for further action. But for that to happen, we must continue to push for more ambitious, yet feasible, solutions. For example, creating a Jubilee Fund with $100 billion (3.25 trillion baht) worth of untapped SDRs for debt buybacks would provide the most vulnerable countries with resources that they desperately need to promote sustainable growth. Equally, one can imagine broader frameworks for debt-for-nature and debt-for-development swaps, as well as new and fairer green trade and investment agreements that enhance domestic resources and facilitate developing countries' participation in the global effort to address climate change. Seville represents an opportunity to look at finance and send a message of commitment to multilateralism. We remain optimistic, because we believe in the power of pragmatism. By focusing on workable solutions that go beyond the text of whatever agreement emerges, we can finally put development back on track. ©2025 Project Syndicate 1995–2025
Mint
02-07-2025
- Business
- Mint
Stiglitz & Cuerpo: The world has an opportunity to join hands on development again
At the Fourth International Conference on Financing for Development this week, delegates are calling for urgent action to fix a system that has stopped working. Prior to the third such gathering a decade ago, in Ethiopia, we had witnessed unprecedented advances toward reducing poverty, increasing school enrolment and providing clean water worldwide. Today, however, progress is not only slowing, but potentially stagnating—or, worse, reversing. Global growth this year is expected to slow to its lowest rate (outside of a crisis) since 2008. The outlook is especially problematic for developing countries that are already growing well below historical averages, and for those 35 countries, mostly in Africa, that are already in or at high risk of debt distress. One out of every three countries now spends more repaying creditors than on health or education. Also Read: António Guterres: The world needs a rescue plan for sustainable development As debt payments crowd out money needed for development, these countries' futures are being jeopardized. Meanwhile, the global gap between the richest and the poorest continues to grow, with Oxfam estimating that the new wealth of the top 1% has surged by more than $33.9 trillion since 2015—enough to end poverty 22 times over. The situation won't change unless there are greater flows of finance to developing countries. Moreover, quality matters as much as the quantity: There has been far too much finance of the kind that leads to financial distress, and far too little of the kind that promotes sustained growth. We believe that finance for development is too important not to involve every stakeholder. As the late Pope Francis emphasized, doing so is a moral obligation. That is the message of the Vatican's new Jubilee Report on debt, reflecting the work of a global commission of experts—which one of us (Stiglitz) chaired. But fixing development finance is also a matter of self-interest for most advanced economies. After all, poverty and inequality give rise to social tension, diseases and conflicts, with spillovers that do not respect national boundaries. Moreover, a lack of finance in developing countries implies a lack of investment in climate-change mitigation, a global public good that is necessary for everyone's future prosperity. Also Read: Debt relief for poor countries: Time for a whole new effort to be made? With the world so divided, and so afflicted by the exercise of raw power and short-term thinking, the Sevilla conference should be seen as an opportunity to renew multilateralism for the common good. But it will need to be more than just an exercise in speech-making about the hope of a better future. Such rhetoric must be translated into tangible progress, and there are some signs that this could happen. The outcome document, the Compromiso de Sevilla, forged at the United Nations in New York, gives us confidence that this gathering will lay the foundation for a new debt and financial architecture. Specifically, Spain has launched the Sevilla Platform for Action, providing a comprehensive framework for coalitions of the willing to advance ambitious but feasible initiatives that will drive material progress in addressing challenges related to sustainable development. Also Read: Can the IMF solve the poor world's debt crisis? For example, we should see the launch of a Global Hub for Debt Swaps to generate more fiscal space for investment in sustainable growth; a Debt Pause Clause Alliance, to ease pressure on vulnerable countries' budgets when they are squeezed by extraordinary events; a broad push to re-channel International Monetary Fund special drawing rights (SDRs)—the IMF's global reserve asset, held mostly by wealthy countries—towards more effective uses; steps to strengthen the voices of debtor countries through a borrower-country platform; and the start of an intergovernmental process on debt restructuring at the UN, following principles that were already agreed to by an overwhelming majority of member states a decade ago. These steps represent just the start. In time, the Sevilla conference could be remembered not as a landing zone, but as a launchpad for further action. But for that to happen, we must continue to push for more ambitious yet feasible solutions. For example, creating a jubilee fund with $100 billion worth of untapped SDRs for debt buybacks would provide the most vulnerable countries with resources that they desperately need to promote sustainable growth. Equally, one can imagine broader frameworks for debt-for-nature and debt-for-development swaps, as well as new and fairer green trade and investment agreements that enhance domestic resources and facilitate developing countries' participation in the global effort to address climate change. Also Read: This time for Africa: With USAID slashed, India and Japan must step in to support development The Sevilla conference represents an opportunity to look at finance comprehensively and send a strong message of the world's commitment to—and trust in—multilateralism. We remain optimistic because we believe in the power of pragmatism. By focusing on workable solutions that go beyond the text of whatever agreement emerges, we can finally put development back on track. ©2025/Project Syndicate The authors are, respectively, a Nobel laureate in economics and professor at Columbia University; and Spain's minister of the economy, trade, and business.
Scoop
28-06-2025
- Business
- Scoop
29-30 June: Massive March And Rally In Seville Demanding UN Action On Debt And Climate At Global Finance Summit
SEVILLE, SPAIN — As world leaders arrive in Seville for a high-stakes United Nations finance summit, global activists are mobilizing in force. A massive public march on Sunday, June 29, followed by a powerful press conference and rally on Monday, June 30, will bring calls for debt relief, fair global tax rules, and climate justice to the forefront of the Fourth International Conference on Financing for Development (FFD4). The events come as the UN prepares to finalize a potential new global framework on tax, debt, and development—without participation from the United States. Civil society groups say the summit represents a crucial opportunity to build a more just financial system, free from the influence of powerful nations and institutions. Public March through Seville Sunday, June 29 – 7:30 PM CET beginning at the Jardines de Cristina, Casco Antiguo, 41001 Sevilla. March route map here. Thousands of protestors will flood Seville's historic center to demand UN-led solutions on the sovereign debt crisis and global wealth inequality through taxation. Colorful banners, music, and street art will highlight the call to end financial colonialism and uphold multilateral cooperation. Rally to Make Polluters Pay with a Solidarity Levy Monday, June 30 – 8:30 AM CET, (location tbc - near FIBES Conference Center) Civil society leaders, faith-based advocates, and frontline voices will address the press and public with a unified message: it's time for a Global Solidarity Levy to hold polluters accountable and fund climate resilience. This striking rally will be rich in visuals and symbolism, with international speakers laying out a vision for equitable global finance. Ice cream Against Inequality Monday, June 30 – 3:30 - 7:30 pm, Calle Augusto Peyré, in front of the main entrance to FIBES Activists will serve up treats and tough truths from a vibrant ice cream truck—inviting summit attendees to pick a 'flavor for the future' or take a bite out of inequality with a billionaire biscotti. MORE INFORMATION: This summit takes place just after the release of the Jubilee Report, commissioned by the late Pope Francis and co-chaired by Nobel Laureate Joseph Stiglitz and former Argentine Minister Martín Guzmán. The report offers a sweeping critique of the current global debt and finance architecture, paired with bold, practical solutions—including proposals to clear illegitimate debt, invest in sustainable transformation, and link financing to citizen-tracked progress indicators. Calls for radical debt transparency are now backed by the World Bank. Currently, just 25% of low-income countries publish data on new debt; campaigners demand that transparency becomes a global norm. Activists say the U.S. rejection of the FFD4 outcome is emblematic of its broader role in blocking efforts for a just, democratic global financial system. While other nations have come together to back the UN process, the U.S. continues to undermine multilateral solutions, perpetuating cycles of debt, austerity, and inequality. 'The world can move forward without the U.S. acting as gatekeeper,' said Andrew Nazdin, director of Glasgow Actions Team. 'And they can do better. We are in Seville to call for true global cooperation—led by those most impacted and long excluded.' Campaigners are demanding urgent steps to dismantle illegitimate debt burdens, establish a UN-based framework for debt resolution, and stop the influence of powerful nations and institutions that continue to impose economic domination over the Global South.
