Question 1

Why is the debt illegitimate?

Accepted Answer

The creditors we're targeting - the International Monetary Fund and the World Bank, development banks, commercial banks and mega-investors - are truly the debtors of the people and the earth they continue to exploit. This is their climate and neocolonial debt.

This is why the debt that they hold, the one that's currently legal, is illegitimate: it perpetuates exploitation and is the exact opposite of the climate and neocolonial debt that remains to be paid.

And very often, a tiny local elite maintains itself by taking a huge part of the credited money without paying it back; whereas the many only see their debt burden sky-rocketing.

Lastly, the Global South, and poorer people in the North, pay several times more interest than what the rich pay for their debt. This debt is a trap!

Question 2

How are creditors benefiting from Global South debt?

Accepted Answer

Especially private creditors - who hold most of the South’s debt - simply earn money with its interests, as they are higher than the interests in the North. Also, and especially when a country's highly indebted, this debt allows creditors to dictate poorer governments how they should govern.

Most often, this translates into investment protection, weak labour laws, boundless security spendings, commodification of nature - and, when there's a lot of debt at stake, even geopolitical alignment to the creditor.

The World Bank and development banks have been promising for decades that their debt enables poorer countries to get rich - in their terms -, particularly by fueling the South's trade with the North. But as long as richer governments, companies and people don't pay much more for what they take from the poorer ones, the South's debt enables more extraction towards the North, and not a power shift.

In this sense, this debt is also a convenient way for the rich to speak about their link to the poor: they're giving money that enables development. In truth, this is how they hide that they drive extraction and continue to pile up their climate and neocolonial debt towards the South.

Question 3

Why and how are GN finance ministers blocking debt cancellation?

Accepted Answer

Because they don't want their - and their friends', i.e. the investors - money to disappear, they want to cash in on their credit. Because they want to leverage their credit, influencing the policy of other governments. And because they don't want to set what in their eyes is a dangerous precedent, as tomorrow's debt cancellation could justify further debt cancellations on the day after tomorrow.

In other words, they see debt cancellations as a loss of their power. This is not necessarily true! Debt cancellation could get them some respect from the Global South, some of the respect that they don't have today because of their extractive policies towards poorer countries.

Global North finance ministers block debt cancellation in four ways: Firstly, they simply don't cancel the debt that they or their governments' development bank hold. They also vote against cancellations in multilateral banks such as the IMF/World Bank. Furthermore, they don't pressure the private investors of their country to do so. And lastly, they don't even speak about it so that only a few officials know that cancellation is possible.

Debt for Climate is here to change that.

Question 4

What about private creditors, should this debt be cancelled as well?

Accepted Answer

If we're talking about the richest creditors - individuals, banks, asset managers, other companies -, hell yeah! These creditors are the blind spot of many debates about debt cancellation, even if their credit most often comes with worse conditions than public credit. For example, while the recent Debt Service Suspension Initiative and the Common Framework (G20, IMF/World Bank) did suspend the payment of some debt during Covid, it only concerned public creditors.

Lobbying by groups such as the Institute of International Finance successfully protected private creditors even from mainstream initiatives such as these ones, true to their motto: "let the taxpayers pay for us!"

Additionally, companies such as the natural resource giant Glencore give credits to governments such as Chad's and extract and export resources at ridiculously low prices in turn. Most of this debt isn't even disclosed to the people - it should be, and it should get cancelled. This debt is nothing less than a blockade of a people initiated transition.

Question 5

Who owes who really?

Accepted Answer

The Global North owes the Global South, the enriched governments and financiers owe the impoverished people and nature. Those who've taken more than what they've given owe those who've given more than what they've taken. The impoverished people and nature are the real creditors of the rich who are ripping them off!

Question 6

What does neo-colonial debt exploitation look like exactly?

Accepted Answer

The principle of debt exploitation is simple: a rich group - a public bank, an investor, the World Bank, et cetera - offers a credit to a poorer one - a Global South government, for example. The latter accepts the offer, as "some money is more than nothing", and with the money, it also accepts the conditions that come with this debt.

Among these are obviously the repayment of the debt at higher interest rates than those of Global North debtors. Often, they're only the beginning of the story, as the debtors commit themselves to adopt policies such as lowering subsidies, wages and social protection and increasing regressive taxes such as consumption taxes.

Creditors such as the World Bank present these policies as attractive for foreign investors - which is true, but this attractiveness equals harm for the people. 
In Chad for example, the World Bank has collaborated with Exxon, Chevron and Petronas and the government for the construction of a pipeline connecting landlocked Mali to a port in Cameroon. The pipeline is now working because of this credit, and the local people don't have anything of it but higher debt.

Their president, who was from the outset known for his corruption, and the oil companies took and take all the revenues. In 2022, Chad's creditors, who've been driving this and other extractive activities, refused to cancel the government's debt. But paying it back only means that Chadian people have to work more at low wages and that the extraction of their resources has to continue.
In this sense, Thomas Sankara, president of Burkina Faso, pointed out in his call for united debt cancellation shortly before his assassination in 1987 that “Debt is a tool which has enabled the rich world to develop, using the resources of the global south without having to pay a fair price”.

Question 7

How does the debt trap work? Why is it not really possible to get out of there?

Accepted Answer

Whether it is possible or not is speculative, the fact is that the trap is not made for people and countries to get out of there. The Global South's external debt is one side of the coin, its trade with the North is the other side of it.

Today, the North pays far less for its imports from the Global South than for goods and services from the North itself. It thereby continues to impoverish the South.

The World Bank and development banks have been promising for decades that their debt enables poorer countries to get rich - in their terms -, particularly by fueling the South's trade with the North. But as long as richer governments, companies and people don't pay much more for what they take from the poorer ones, their debt remains a trap. It enables more extraction, and not a power shift.

Question 8

Is debt cancellation possible?

Accepted Answer

Every creditor can cancel the debt or some of the debt he holds through a simple contract. One example is the 1953 Agreement (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/269824/German_Ext_Debts_Pt_1.pdf)on German External Debts, by which several creditor governments cancelled an important part of the German debt: it's a signed piece of paper that names the creditor, the debtor and the debt that is being cancelled.

Debt of individuals and companies can be cancelled in the same way. Even if details change according to national law or the international practise of governments, the basics are the same. So, the stake’s rather if a creditor wants to cancel, and not if s/he can.

Question 9

Why are we calling for debt cancellation and not for debt relief?

Accepted Answer

The pure concept of ‘debt relief’ or ‘debt forgiveness’ sounds a lot like it’s upon the rich world to show kindness and help those poor, poor countries in debt distress. In terms of reflecting on the history of power imbalance and exploitation between the North and the South though, it’s not a matter of charity. But it’s a matter of justice.

In fact, the concept of the charitable Global North perpetuates the dysfunctional power structures once more and erases the autonomy and strength of the South. The South is depicted in a victimised position of a powerless recipient of charity while this whole depiction of ‘reality’ is actually painted in colours of denial and madness when looking at the historical context.

For the true debt is the climate and (neo)colonial debt that the richest governments and companies owe to the Global South. Inversely, the financial debt we talk about is owed by the Global South to the richest governments and companies. They can only start to face their own climate and neocolonial debt after a tabula rasa, a cancellation, of the financial debt they hold. The danger of relief, which is a partial cancellation, is also that it can justify and perpetuate the uncancelled part of the debt and thus also the power that today's big creditors have over their debtors. This prevents a real power shift.

Question 10

Why are we not calling for debt swaps?

Accepted Answer

A Debt swap is an exchange of Global South debt against a pledge to conserve land, oceans to protect biodiversity or to lower greenhouse gas emissions. It is often big NGOs such as The Nature Conservancy and WWF that bring in the money and push for the swap contracts.

These contracts are mostly kept secret and even if they impact the ones who live in the region that is to be "protected", they don't allow for any participation. Once they're signed, Global South governments thus get a relief of some of their external debt and have to spend the freed money according to their pledge.

Some NGOs have been promoting debt for nature/climate swaps since the 1980s. They've never tried to change the game but to satisfy the guilty conscience of rich environmentalists, their own pockets, and to have a say in the government of "beautiful Global South nature".

Debt swaps not only confirm the legitimacy of Global South debt which truly is illegitimate, their terms are also dictated by NGOs, investors, the IMF/World Bank and rich governments and are thus truly undemocratic.

We call for a debt cancellation that allows a people-led, democratic transition and rejects any arrangement that takes the people's decisions.

Question 11

What would be the economic effect for the Global North?

Accepted Answer

Debt cancellation mainly impacts the ones who hold that debt in the North, i.e. banks, investors - they hold about two third of it - and governments - they hold about one third. They would lose a part of their property, and their livelihood wouldn't be endangered (contrary to the current state of affairs, which already harms the livelihood of millions of people).

The people in the North who don't hold debt, and this is the majority, wouldn't feel anything. The scenario differs a bit for countries that have large and investment-based pension funds such as the US, Norway and Australia - some of these pension funds hold Global South debt and their present and future pensioners are thus concerned by debt cancellation.

In that case, Global North governments can take additional measures that protect poorer people from this effect.

Some might argue that large-scale debt cancellation affects the general economic dynamism of the North, but this view is based on the wrong assumption that credit drives the economy and not work and climate.

Question 12

Why are you not calling for debt cancellation of the Global North?

Accepted Answer

Many Global North governments are highly indebted. For example, the US government's debt to GDP ratio is about 128% and thus higher than in most of the Global South. But Global North governments already have enough to enable a just transition. They can continue to borrow money at low cost. In their case, the transition is a question of their priorities and not of their power to do so.

On the other hand, many Global South don't have enough for a just transition, and they cannot continue to borrow at low cost. The transition is fundamentally a question of their power to do it, besides being one of their priorities as well, of course. This is why debt cancellation makes sense here - socially and ecologically.

Many still have the Greek debt crisis in mind, and Greece counts as a Global North country. But of course, Debt for Climate would have mobilised for a cancellation of Greek debt, if we were as old as that; and we'd still mobilise if the cancellation of the Greek debt were enabling a people's-led transition!

Question 13

Why do we have to create a united front against debt?

Accepted Answer

Because the richest creditors - the International Monetary Fund and the World Bank, development banks, commercial banks and mega-investors - do everything to make their debtors pay. They know that there are trillions at stake, and they won't give them up lightly, even if their debtors are in the midst of climate and social urgency.

The last years have shown that a gentle request from one debtor doesn't change anything: only a global mass mobilisation that unites labour, social and environmental groups will make widespread debt cancellation happen.

Debt is not the issue of a single country, group or individual, debt is generally a way in which the rich take poorer people's work and resources. The people's united answer has to be at the level of the matter.

Debt for Climate

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