The G20’s wrong solutions and the need to suspend debt repayment

29 January by Eric Toussaint

Last April, the G20 launched the idea of debt service suspension by poor countries until the end of 2020. What actually happened?

Measures taken by the G20 G20 The Group of Twenty (G20 or G-20) is a group made up of nineteen countries and the European Union whose ministers, central-bank directors and heads of state meet regularly. It was created in 1999 after the series of financial crises in the 1990s. Its aim is to encourage international consultation on the principle of broadening dialogue in keeping with the growing economic importance of a certain number of countries. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, USA, UK and the European Union (represented by the presidents of the Council and of the European Central Bank). regarding debt relief are utterly insufficient as well as unacceptable since they involve intensifying neoliberal policies

The fact is that measures taken by the G20 regarding debt relief are utterly insufficient as well as unacceptable since they involve intensifying neoliberal policies. The G20 considered that only 73 out of 135 Developing Countries (DC) could possibly benefit from rescheduling the repayment of bilateral debt (i.e. from country to country. This covers at best 1.6% of the DCs’ public external debt. If a country wishes to reschedule payment of its bilateral debt, it must commit itself to implementing a neoliberal programme imposed by the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
. The limitations are such that only 46 countries subscribed to the G20’s initiative. It has to be underscored that the G20 does not grant any cancellation, only rescheduling of part of the debt.

In Africa, the burden of public debt went from 35% of GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
in 2010 to 60% in 2018. Its repayment drains on average 13% of countries’ revenue. How can we escape this spiral?

To escape this spiral, debt repayment must be suspended and other measures taken: enforce a special tax on large fortunes, levy fines on companies responsible for major tax evasion, freeze military spending…

In these times of pandemic do you think it is legitimate to assert the right to suspend debt repayment to meet the needs of the populations?

When a government calls upon the state of necessity or a fundamental change of circumstances, the legitimate or illegitimate nature of the debt does not matter. Even if the debt claimed is legitimate, the country can still suspend payment

Yes of course. There are solid legal arguments to support a decision to unilaterally suspend debt repayment. Here are two. The state of necessity: a government can stop paying its debt because the objective situation is a severe threat to the population and further repayment prevents it from meeting the population’s most urgent needs. This is exactly the situation that many of the world’s countries are now facing: the lives of their citizens are under direct threat if they are unable to finance a whole range of urgent interventions to save as many human lives as possible. A fundamental change of circumstances: the execution of a debt contract may be suspended if circumstances have changed beyond the debtor’s control. Jurisprudence on this point acknowledges that a fundamental change of circumstances can prevent the execution of an international contract. When a government calls upon the state of necessity or a fundamental change of circumstances, the legitimate or illegitimate nature of the debt does not matter. Even if the debt claimed is legitimate, the country can still suspend payment.

A substantial increase in public health spending will have major beneficial effects to fight other diseases that plague mainly countries of the South, notably in Africa. An estimated 400,000 people die each year from malaria, mainly in Africa. Tuberculosis is one of the ten leading causes of death in the world. In 2018, 1.5 million people died of it. Deaths due to diarrhoea amount to more than 430,000 per year. About 2.5 million children die each year worldwide from malnutrition, either directly or from diseases related to their low immunity due to malnutrition. Such diseases and malnutrition could be successfully fought if governments devoted sufficient resources to health care instead of repaying debts.

What country could be mentioned as an example for deciding to suspend debt payment?

From November 2008, Ecuador suspended repayment of most of its debt as advised by a committee for an integral audit of the debt in which I participated as representative of the CADTM. In concrete terms the country put an end to paying interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. on securities that had been sold on Wall Street for $3.2 billion. The international financial media were outraged. But in June 2009, creditors of 91% of the concerned securities accepted a loss of 65%. This meant that Ecuador had won over $300 million a year over twenty years. This haircut made it possible for the government to increase social expenditure over the years 2009-2010-2011, notably on health care. The people’s living conditions sharply improved. Ecuador’s victory on its creditors was complete. And when the country turned back to the financial markets, investors rushed to provide loans.

Wasn’t there a turning point in Ecuador in 2011?

When Rafael Correa became president in 2007, it was thanks to the social mobilizations that marked the 1990s until 2005. Without them his proposals would not have resonated so widely and he would not have been elected.

When Rafael Correa became president in 2007, it was thanks to the social mobilizations that marked the 1990s until 2005. Without them his proposals would not have resonated so widely and he would not have been elected. Unfortunately, after a good start, he antagonized a large part of the social movements and opted to modernize the extractive export model. His successor, Lenin Moreno, broke with Correa and went back to the brutal implementation of neoliberal policies. Once again, only social mobilizations will be able to overcome those policies and put the anti-capitalist structural changes needed for people’s empowerment back on the agenda. In October 2019 the CONAIE and other trade unions, feminist associations and environmental groups came together to draft an excellent alternative proposal to capitalist, patriarchal and neoliberal policies; that proposal should be used as a basis for a vast government programme [1].

The issue of illegitimate debt and of rejecting IMF and World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

policies is once more at the forefront of social and political struggles. [2]. In a file published by over 180 popular Ecuadorian organizations in July 2020 we find the following demand: “suspension of external debt repayment and an audit of the external debt that has accumulated since 2014, as well as citizens’ control on the use of contracted debts.” [3]

Source: The first three questions and answers were published in the weekly magazine L’Humanité dimanche of 14 to 20 January 2021. The fourth question and answer were added afterwards.

Translated by Christine Pagnoulle and Vicki Briault


[1CONAIE, Entrega de propuesta alternativa al modelo económico y social, 31 October 2019,

[2Collective statement signed by Éric Toussaint, Maria Lucia Fattorelli, Alejandro Olmos Gaona, Hugo Arias Palacios, Piedad Mancero, Ricardo Patiño, Ricardo Ulcuango “We denounce the renegotiation of the debt by de Lenín Moreno’s government”, published on 3rd August 2020,

[3See PROPUESTA-PARLAMENTO-DE-LOS-PUEBLOS.pdf published in July 2020

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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