Worst ever global debt crisis affects billions of people

World Bank and IMF are part of the problem and not of the solution

17 October 2024, More than one billion people, half of whom are children, live in multidimensional poverty and unless deep-seated systemic barriers – such as discrimination and unequal political participation – are measured and addressed, the gap between those who are progressing and those left behind is expected to grow further.

Download the Global Call to Action Against Poverty GCAP Statement on 17 October 2024
in English, Spanish and French.

Debt Crisis threatens to kill the SDGs

One of the most pressing challenges facing Latin America, Africa and Asian nations is a worsening debt situation that has been exacerbated by COVID-19 pandemic expenditures, the war in Ukraine and the climate emergency. In many countries, more than 30% or even up to 60% of the budget is spent for debt servicing – often more than for health and education together.  

Currency devaluations have raised the cost of servicing external debt in many instances, while governments have been forced by conditionalities imposed by international institutions to implement austerity measures and cut spending on health, education and social protection. The UN estimates that only 17% of the SDGs will be achieved by 2030.

The global financial architecture, driven by the World Bank and International Monetary Fund (IMF), fails to provide adequate funding for the achievement of the SDGs – like social protection (SDG 1.3), even though social protection is a basic human right. On the contrary, these two institutions founded in Bretton Woods 80 years ago do further reinforce the impact of the debt crisis by demanding austerity from governments.

This is no wonder: The World Bank and IMF are dominated by G7 countries. The UN organisation for Trade and Development (UNCTAD) notes that indebted countries often lack adequate representation in multilateral institutions dealing with debt-related issues.

Conflict and Climate

We also draw attention to the domino effects of ongoing global conflicts and the climate crisis. Many countries and territories face wars and conflicts, while flooding, drought and heat waves resulting from man-made climate change exacerbate poverty and inequalities. Urgent international cooperation is needed to address the root causes of conflict and to ensure that development efforts can thrive in a world free from violence and instability.

Financial targets to support developing countries in their climate actions post-2025 — known as the New Collective Quantified Goal (NCQG) within the context of the Paris climate agreement — must also be adopted.

A growing wave of anti-NGO laws and harassment threaten the ability of civil society organizations, though, to advocate for reforms like these. People in nearly 120 countries face civic space restrictions, due to military coups and other forms of repression.

Global People’s Assembly at UN Headquarters

During the UN Summit of the Future on 22-23 September 2024, civil society groups and people’s leaders representing some of the world’s most marginalized communities met across from UN headquarters in New York. More than 400 activists participated in the fifth edition of the Global People’s Assembly, which is the culmination of 30 regional and constituency-level gatherings, national-level assemblies, and thousands of community actions. The Global People’s Assembly demanded meaningful changes that address the root causes of economic injustice and solutions that prioritize the needs and rights of those left behind.

Our Calls on 17 October 2024:

1.  We are calling for an immediate ceasefire in Gaza, Lebanon, Sudan and other countries.
   
2. We demand the immediate cancellation of unsustainable and illegitimate debts that disproportionately burden developing countries and drain off resources from essential services like healthcare, education and social protection and to establish a sovereign debt workout mechanism under the UN.
3. We call on all governments to fund universal social protection, health and education as human rights of all people and to the governments of the rich countries of the Global North not to block the reform of the international financial architecture anymore, to  fulfill their commitments to Official Development Assistance of 0,7% of the GDP and to support the creation of new financing mechanisms like Special Drawing Rights in order to provide resources to fund universal social protection floors, health care and education.
4. We call for the urgent transformation of the International Financial Architecture by ending the domination of rich countries through the democratization of international financial institutions (IFIs), including the IMF and the World Bank, to ensure equal representation of countries from the Global South in decision-making processes.
5. We demand action against illicit financial flows, including capital flight, tax evasion, and avoidance by multinational corporations. This includes the development of an UN Tax Convention that compels corporations to pay taxes fairly in the countries where they operate, halting the drain of resources from the Global South to the Global North.
6. We call for clear commitments to climate financing, providing clear timelines, amounts, and the nature of funds (grants, not loans) to support adaptation and mitigation efforts. We affirm the principle of Common but Differentiated Responsibilities and demand that rich countries take responsibility for their historical emissions by providing adequate resources to developing nations.