Timeline of debt cancellations in history
- Antoine Kopij
- May 11
- 4 min read
A timeline of some of the largest debt cancellations in history, with corresponding amounts adjusted to today's U.S. dollar.
Calculations are based on historical inflation rates and are intended to present the relative size of the debts.
Debt seems to have been part of the human experience for as long as we have had an economy based on agriculture. But debt cancellation is as much a part of this experience as debt itself.
There were many more examples that could have made it to this list, but the focus was around the 20th century and the hegemonic powers of the USA, Russia and Europe, in order to demonstrate that today’s creditors of the Global South were once debtors themselves.
When systemic shocks like world wars and financial crises hit, unsustainable and illegitimate debt was cancelled, repudiated or simply forgotten, to preserve society as a whole. Today’s largest systemic shock is the climate crisis. Debt must be cancelled in order to face it.
In fact, if history is a lesson, debt will be cancelled because it is the only outcome that debt can lead to.
Dianx created the illustration and reviewed the part on the Mexican revolution. Scarlett reviewed and corrected the part on the Russian revolution. Jana reviewed and corrected the part on the Ecuadorian debt audit.
Ancient rulers periodically cancelled debts to prevent social unrest. An estimated amount is difficult to quantify, but includes large portions of agricultural loans. To give an idea of the proportion, the current value could be between $1 and $5 billion.
Debt is as old as agriculture, but ancient civilisations knew that letting debt accumulate indefinitely could only lead to catastrophe. The oldest known text of law, the Hammurabi Code, stipulates that debt should be forgiven in case of famine or natural catastrophe.
A debt crisis following U.S. independence led several states in the Union to repudiate or default on debts to British creditors totaling about $121 million, equivalent to $4.4 billion today. Later, after winning the Civil War (1861-1865), the Union repudiated the debts incurred by the southern states to finance the war.
The Bolshevik revolutionaries repudiated the foreign debt of the Tsarist regime. According to Eric Toussaint, the total amount of Russian debt in 1917 was £3,385 million, or $381 billion in today's dollars. The repudiation of national debt by the communist regime was the largest debt repudiation in modern memory. Truly, it was the largest debt repudiation that we know about.
The USA lent about $10 billion to the Allied powers during and after the First World War. It was never fully repaid or officially cancelled. Today it would be equivalent to $245 billion.
France was trying to get payment from Russia to pay its own debt to the US, while England was piling pressure on Germany to pay for war reparations.
Under the Roosevelt-Ávila Camacho Agreement, Mexico reduced its debt by $460 million (about $10 billion today), facing private creditors who claimed $510 million. This agreement took place in the context of World War II and allowed Mexican workers to support the labor shortage in the U.S.
After the Second World War, a treaty signed in London cancelled 50% of West Germany's debt, about 15 billion German marks out of a total of 30 billion. Adjusted for inflation, this is equivalent to about $742 billion today.
Immediately after the war, Germany was expected to pay large reparations to the Allies. But the victors had other things to consider.
Initiated in 1999, the Jubilee 2000 organized a coalition of civil society organizations and demanded the cancellation of the debt of poor countries and denounced the role of the IMF and the World Bank as financial executors of rich countries.
The HIPC programs and the Multilateral Debt Relief Initiative (MDRI) have provided relief of over $100 billion in debt to 37 countries, 31 of them in Africa.
Despite the relief, these countries' debts have grown again due to factors such as the COVID-19 pandemic, food inflation due to the war in Ukraine, and high interest rates in Western economies.
In 2007, Ecuador’s president Rafael Correa commissioned an audit of the country’s debt from a group of experts. Following its conclusions, Correa declared most of the country’s debt illegitimate because it had been contracted against the interest of the population. However, instead of a formal repudiation, Correa chose to buy back about 70% of the outstanding debt, leveraging the income of oil extraction. By doing so, Correa made sure Ecuador would still be able to borrow on international markets.
The climate crisis presents an unparalleled challenge to our planet. Facing the cost of adjusting to climate change and transitioning to renewable sources of energy, there is no desirable outcome for the population of the Global South without debt cancellation. On the side of creditors, there is no plausible path to sustainability without debt cancellation to allow the necessary investments, in the North as well as in the South.
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