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Debt cancellation

(Image: Unsplash/Julie Ricard)

Why are we calling for debt cancellation for some other countries when we’re facing cuts in our own country?

The top ten reasons

  1. Much of the debt of developing countries is unpayable as a result of high interest rates, economic uncertainty made worse by the climate crisis, events such as the COVID19 pandemic, and lack of infrastructure.
  2. Rates of interest on debts for poor countries are around six times higher than rates of interest for richer countries.
  3. Many countries are paying more interest on their debts than they are able to pay for education, health care or adaptation to climate change.
  4. Developing countries were encouraged to take out loans when interest rates were low. Subsequently, interest rates went up.
  5. Some debts were taken out without public consent to finance ill-advised development projects.
  6. Some developing countries were making progress on debt repayments when the war in Ukraine increased energy and grain prices.
  7. Around 60% of the debt is owed to private banks and other financial institutions which insist on high interest rates and refuse to take part in periodic ‘debt restructuring’ agreements. In 2022 those private institutions made $68 billion more than they lent.
  8. Richer countries, and companies based in them, have grown rich through exploiting developing countries, and some of the debt is a direct result.
  9. Developing country governments are struggling to cope with extreme weather events caused by climate change which they have done little to cause.
  10. Even though UK government finances are difficult, they are nowhere near as difficult as those of developing countries’ governments. Their debt repayments are causing malnutrition, conflict, illness, forced migration and death.
(Image: Unsplash/Nacho Arteaga)

Pope Francis on debt cancellation

“I encourage leaders of nations with Christian traditions to set an example by cancelling or significantly reducing the debts of the poorest countries.” (Appeal to world leaders, 1 January 2025)

“Another heartfelt appeal that I would make in light of the coming Jubilee is directed to the more affluent nations. I ask that they acknowledge the gravity of so many of their past decisions and determine to forgive the debts of countries that will never be able to repay them. More than a question of generosity, this is a matter of justice.” (Spes Non Confundit, paragraph 16)

“It is made all the more serious today by a new form of injustice which we increasingly recognize, namely, that “a true ‘ecological debt’ exists, particularly between the global North and South, connected to commercial imbalances with effects on the environment and the disproportionate use of natural resources by certain countries over long periods of time”. (Spes Non Confundit, paragraph 16)

(Image: Unsplash/Sincerely Media)

Prayer for wisdom and justice in addressing external debt

By Fr Charles Chilufya SJ

Loving and Gracious God, help us understand that we have the power and the duty to act against the injustices that bind people in poverty and debt.

Grant us the courage to challenge the structures that perpetuate these conditions, and the strength to work tirelessly for a world where every person can achieve their full potential.

Inspire our hearts with your compassion and justice. Empower us to be bearers of hope and agents of change. Together, may we help bring forth solutions rooted in fairness and equity; economic systems that uplift and create hope for the downtrodden; and a future where every nation can walk the path of sustainable development, free from the shackles of debt.

May we be instruments of your peace, secure in the faith that, through our collective effort, poverty can be overcome. Amen.

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