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[Press release] World Bank / IMF / G20 Spring Meetings Paltry measures doomed to failure
by CADTM International
11 April 2021

At the spring meetings of the Bretton Woods institutions from 5 to 11 April 2021, the World Bank, IMF and G20 made new announcements in an attempt to respond to the debt crisis in the countries of the South, exacerbated by the economic and health consequences of the Covid-19 pandemic. Far from living up to expectations, these paltry measures are doomed to failure.

One quarter of developing countries ignored

The measures ignore half of the countries under suspension of payments

102 countries (including 5 high-income countries) are potentially concerned by the various adopted measures: 86 by various IMF financial assistance measures, [1] as usual by loans, largely conditional on austerity policies; [2] 29 countries by the Catastrophe Containment and Relief Trust (CCRT) [3] and 73 countries by the Debt Service Suspension Initiative (DSSI) [4] (launched by the G20 in close collaboration with the Paris Club, with some countries combining all or some of the measures. Without going into the details of these measures here, they ignore half of the 21 countries currently under suspension of payments, [5] including Argentina, Lebanon, Venezuela and Zimbabwe. Isn’t there some inconsistency here?

Still no debt cancellation by the World Bank and the IMF

The IMF and World Bank not cancelling any debt is strengthening the creditors’ grip

Since the beginning of the pandemic, the IMF and the World Bank have repeatedly called on bilateral and private creditors to cancel debts. Yet, although between them, the World Bank and the IMF hold 46% of the external public debt of the 73 DSSI countries, neither institution has deigned to set the example. In April 2020, the IMF announced US$251 million in “debt cancellation” for 29 countries through the CCRT. On 5 April 2021, it was increased to US$238 million. [6] In fact, several Northern countries have topped up this fund in order to pay the IMF debt service instead of the 29 countries concerned. The IMF is not cancelling any debt and the creditors are strengthening their grip. As for the World Bank, which is subjected to financial interests, it also refuses to cancel any debt, on the pretext of protecting its “triple A” rating, even though its 189 member states are its guarantee. Isn’t there some degree of equivocation here?

The IMF has announced a fresh allocation of $650 million in Special Drawing Rights (SDRs), but who will benefit?

Barely 1% of the SDRs’ allocation would go to low-income countries, compared to 31.5% for middle-income countries. The lion’s share (67.5%) is made available to high-income countries

In order to solve Southern countries’ balance of payments difficulties and declining foreign exchange reserves, the IMF is expected to allocate US$650 billion in Special Drawing Rights by June. While SDRs have the merit of not further burdening debt payments, the proposal is likely to be totally ineffective. As SDRs are allocated according to quotas held by member countries based on their economic weight in the IMF, barely 1% of this allocation would go to low-income countries, compared to 31.5% for middle-income countries. The lion’s share (67.5%) [7] is made available to high-income countries. In any case, this is a far cry from the US$3 trillion in SDRs demanded by many organizations working on developing countries’ debts. The CADTM remains fiercely opposed to an additional allocation of SDRs. It lends legitimacy to the IMF and strengthens its position as a creditor, even though the institution is at the origin of the structural problems experienced by these countries since the 1980s. Isn’t there a measure of contempt here?

The DSSI initiative prolonged, why?

Remember that the measure is once again conditional on the signing of an agreement with the IMF? This initative is definitely not worth the trouble

In April 2020, the G20 launched the DSSI initiative for 73 countries. It consisted of a temporary suspension of payments on official bilateral external debt for the period May to December 2020. As already mentioned, this was not a cancellation but a deferral of payment. According to this proposal the payment was postponed to 2022; then, given the evolution of the pandemic and the economic crisis, payment was again postponed to 2024. As the situation continued to deteriorate, the period of temporary suspension was extended for the first time until June 2021 and then until the end of 2021. Payments are due in 2026. As all the parties - including the G20-WB-IMF - agree that the DSSI is insufficient and inappropriate, why stubbornly persist with it? Most concerned countries clearly reject the initive since only 46 of the entitled countries have applied. Remember that the measure is once again conditional on the signing of an agreement with the IMF? This initative is definitely not worth the trouble.

Rating agencies and private creditors snigger at IFIs and Southern populations

private interests continue to snigger at the IFIs and the people of the South

Meanwhile, private interests continue to snigger at the IFIs and the people of the South. Already contemptuous of them last spring, the rating agencies have once again brandished the threat of a downgrading of the sovereign rating of countries using DSSI. As for private creditors, the main holders of the external public debt of the countries of the South, they continue, sure of their impunity, to ignore the debt cancellations that are supposed to have become binding through the illusory application of the comparability of treatment principle since the creation of the Common Debt Framework in November 2020.

Only alternatives: Suspension, audit and repudiation of debt

For the countries of the South, there is an urgent need to introduce unilateral measures of self-defence

The international financial institutions remain determined to keep the noose around the necks of the people of the South by not cancelling any debts. For the countries of the South, there is an urgent need to introduce unilateral measures of self-defence. First, by suspending debt payments on the grounds of necessity and fundamental change of circumstances which are legitimate legal arguments based on international law. Secondly, by carrying out a citizens’ audit of the public debt with the aim of repudiating illegal, illegitimate, odious and unsustainable debts.
It is time to override the inconsistencies, equivocation, contempt and ineptitude of the IFIs and international private creditors.


Footnotes :

[3Ibid.

[5Countries in suspension of payment: Argentina, Cambodia, Congo, Cuba, Eritrea, Gambia, Grenada, Iraq, Lebanon, Mozambique, Sao Tome and Principe, Sudan, South Sudan, Suriname, Syria, Venezuela, Yemen, Zambia, Zimbabwe.

[7Daniel Munevar, Chiara Mariotti, The 3 trillion dollar question: What difference will the IMF’s new SDRs allocation make to the world’s poorest?, Eurodad, 7 avril 2021. Disponible à : https://www.eurodad.org/imf_s_new_sdrs_allocation

CADTM International