INTERVIEW WITH JUBILEE DEBT CAMPAIGN
REAL’s Kevin Boon interviewed Tim Jones, Head of Policy for the Jubilee Debt Campaign (JDC) on 10 January 2022.
What is the history of the JDC?
The JDC formed in the late 1990s as a coalition of local campaigners and national UK organisations campaigning for debts to be cancelled for the millennium. It was part of a wider global campaign. It led to £130 billion dollars of debt being cancelled in 36 countries but didn’t lead to any structural change in how the international debt system works. COVID has accelerated the debt crisis further. As well as campaigning for cancellation of unjust debts and more responsible lending, JDC also campaigns on household debt in the UK.
What is the historical context of debt in the developing world?
Following the 2008 global financial crisis, interest rates have been low in the West which has resulted in a lot of money being lent to the global South. Going back further in history a lot of the debt was a legacy of colonialism. We have a global economic system where many countries in Africa and Latin America export raw materials and import finished products. The dependence on exporting raw materials exposes countries to the large fluctuations in prices for these commodities. This is a structural reason why countries get locked into low value-chain activities and therefore into debt crisis.
Who is mostly lending the money?
International institutions such as the World Bank and IMF are responsible for about one third of the debt. Governments also lend money and are responsible for about one third of the debt. The remainder is private lenders, banks and hedge funds. The latter tend to lend at the highest interest rates and are therefore the most critical.
Which countries have the most debt and how does it affect them?
Countries like Zambia and Chad are two of the most affected. They are not paying some of their debt with a view to getting it cancelled. Ghana and Sri Lanka also have very significant debt. Last year we calculated that there are 52 countries in debt crisis which means their debts are so high it’s having a serious impact on their ability to meet the basic needs of their population. These are mainly in Africa and Latin America with just one in Europe – Greece. Small states in the Caribbean and Pacific are particularly affected linked to their susceptibility to climate-related crises. Because indebted countries have to spend money on payments they don’t have the money to invest in, for example, health and education.
What are vulture funds and how do they make the situation worse?
If a country stops payments, this causes the value of the debt that they owe to crash. Vulture funds come in and buy the debt at a low price and the debt is restructured. The vulture funds then sue the countries in court to get paid in full. They can make huge profits; they may have only paid 10% of the value of the debt and then, through legal action, recover 100% of the debt. This phenomenon makes it much more difficult for countries to get out of debt.
What is the link between the debt crisis and climate crisis?
Because there isn’t adequate grant financing for countries experiencing long-term climate issues such as drought or severe climate events they are forced to take on debt. The debt payments that countries have to make prevent them from tackling climate change. In Autumn 2021 figures released showed that, for the poorest countries, they are on average spending five times as much on debt payments than measures to help limit the impact of climate change. This in turn makes them more vulnerable to a future climate event. With the climate finance that is being provided by richer countries over two thirds is as loans rather than grants. This is despite the fact that the rich countries have had a much greater impact in terms of emissions than poor countries. Grants are needed for mitigation, adaptation and compensation for damage caused by the impacts that can’t be adapted to. Of these, mitigation is getting some funding and adaptation a little but there is generally nothing relating to compensation. When a country is hit by a climate disaster they should have debt payments cancelled to allow them to recover effectively.
What are your main priorities for this year?
Our main focus is to get debts cancelled particularly for countries in crisis and those going through a debt cancellation process. At the moment Zambia and Chad are negotiating with their creditors so we’re campaigning to get as much debt cancelled as possible. We are also campaigning to make the system work better for other countries that also need debt cancellation such as island states in the Pacific and Caribbean. A key focus for 2022 is getting loans to be much more transparent. There is currently a lot of secrecy around debt and loans.