Will the G20 let private finance escape debt relief once again?
The G20 Finance Ministers’ and central bank Governors’ meeting (9-11 July) does not have mounting indebtedness by low- to middle-income countries high on their agenda. Even the BIS warned against a chaotic debt fall-out could lead to financial and economic instability crisis (see article attached). As you know, private creditors escaped the DSSI and other debt relief efforts, with huge consequences for people in low and middle income countries.
SOMO has analysed the role of the Institute of International Finance (IIF), the lobby group for many (but not all !) private players in the debt market, which used its privileged access to the G20 to articulate how private creditors see debt treatment. IIF’s core argument has been that developing countries should maintain market access to private credit, i.e. create more debt, not only for liquidity during the pandemic, but also to finance SDGs and climate goals with a whole range of new financial products. Clearly, it would be better for the private creditors to assume the risk they took and provide debt cancellation or swift restructuring. They returned billions of dollars to their shareholders this year. Since private creditors are mostly based in rich G20 countries, G20 finance ministers and central bankers should use their legislative, regulatory, supervisory and monetary means to contribute to an orderly and coordinated resolution of unsustainable debt in which private creditors pay their due share.
SOMO’s long read is here , which you can use in your publications and discussions with G20 policy makers. Let me know if you want to have a copy with more detailed footnotes.
Myriam Vander Stichele
SOMO – www.somo.nl