Labour’s Preet Gill has called for the government to push for “the cancellation of debt repayments for low-income countries” – allowing them to prioritise investment in their health systems during the Covid-19 crisis.
Commenting ahead of the 2020 spring meeting of the International Monetary Fund and World Bank, the Shadow International Development Secretary criticised the UK government for being “too slow in driving global cooperation” during the pandemic.
Gill warned that the poorest in the world will be worse hit by the virus, and declared that it is “unacceptable” for such countries to be expected to prioritise debt payments during “the worst health crisis in over 100 years”.
She said: “The coronavirus outbreak is leading to a health and economic crisis around the world. Although the virus is indiscriminate in its reach, it is the poorest and most vulnerable who will be hit hardest, and we risk seeing half a billion people pushed into poverty globally.
“It is unacceptable that some of the poorest countries are being expected to prioritise debt repayments over the safety of their citizens during the world’s worst health crisis in over 100 years.
“This is a global emergency and if we can ensure the most vulnerable people are protected overseas, it will help us to quickly tackle this crisis. In the long run this will also protect people and front-line services in the UK.
“The British government has been too quiet on this issue and too slow in driving the global cooperation that this crisis desperately needs. That is why I am calling on the UK to use its influence to urge for the cancellation of debt repayments for low-income countries, without conditions”.
Gill adds that this measure would “free up billions of pounds to help the poorest countries invest in their health systems and help protect and save lives in all parts of the world”.
Many developing and poorer countries of the world have not yet been as badly impacted by the virus. The spread in Africa and South America, for example, is generally lower than that of Europe and North America at the moment.
But many people are worried, and have cited concerns, about what will happen as the health crisis continues to spread and takes hold in an increasing number of lower income countries.
In January, senior economists at the World Bank warned of the “rising vulnerability” of debt in low-income countries, stating that “interest payments are absorbing an increasing proportion of government revenues”.
And as economists have highlighted, the plight of poorer countries has far-reaching implications. Grace Blakeley wrote: “A failure to write off debts can only spell catastrophe for the world’s poorest countries and, by extension, the global economy.”
She explained that, facing rising costs due to the pandemic, poorer countries will have no choice but to borrow more. At the same time, investors looking to leave those markets due to the impact of the virus are selling their government bonds, pushing up the cost of borrowing.
The IMF can step in, as it has done in the past, to provide struggling countries with funds to repay their debts. But this is of course a loan and usually comes with strict and punitive conditions attached.
UK charity Jubilee Debt Campaign is spearheading a call for debt relief. Commenting on the campaign, director Sarah-Jayne Clifton said: “Developing countries are being hit by an unprecedented economic shock, and at the same time face an urgent health emergency.”
The IMF and the World Bank issued a joint statement last month, urging creditors to suspend debt payments for developing countries during the Covid-19 crisis. However, the charity has said that this does not go far enough.
Clifton stated: “The suspension on debt payments called for by the IMF and World Bank saves money now, but kicks the can down the road and avoids actually dealing with the problem of spiralling debts.”
Major charities including Oxfam and ActionAid International have joined the campaign for debt relief in light of the global pandemic, along with more than 100 other organisations.
The total number of recorded cases of coronavirus across the globe has reached 1,929,922, with 120,449 confirmed deaths – but, accounting for differing levels of underreporting, the true figure is thought to be much higher.
The country with the highest death toll is the US, having recently overtaken Italy. As of April 13th, Public Health England report that 11,329 people in the UK have so far died from the virus.