The debt burden crushing poor countries will not be alleviated until creditors in rich countries are made to give up some of their wealth
by John Smith
Part 2 - Rescuing the rich
But that's not all.
This debt 'relief' only applies to interest owed to governments, not what they owe private lenders. Even the World Bank has excluded itself from this minuscule generosity – David Malpass rejected calls to freeze $7bn in interest payments owing to it, saying that forbearance would harm the Bank’s ability to make new loans. As a result, only 41% of the $42.7bn that DSSI countries owed in debt payments in 2020 is eligible for relief.
The suspension of interest payments to government creditors makes it easier for these desperately poor countries to service their debts to private creditors – such as Blackrock, JP Morgan, HSBC, UBS and the wealthy individuals they serve. In other words, rich countries’ governments are not rescuing poor countries, they are rescuing rich investors in those poor countries.
As David Malpass (who was part of Donald Trump’s government before his appointment as World Bank head in 2019) has even admitted, “There is a risk of free-riding, where private investors get paid in full, in part from the savings countries are getting from their official creditors.”
From the beginning, private creditors have been urged to participate in the DSSI by offering delays to interest payments, but they have intransigently refused to do so.
In November G20 leaders repeated these empty calls: “There is a lack of participation from private creditors, and we strongly encourage them to participate on comparable terms when requested by eligible countries.” As Stephanie Blankenburg, head of debt and development finance at the UN Conference on Trade and Development, said: “There is an agreement among the advanced and developing countries in the G20 to only represent creditor interests.”
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