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The UK Government is one of the biggest obstacles to the world’s poorest countries securing debt relief, according to a coalition of aid organisations ahead of a crucial international development conference.
Christian Aid, the non-profit coalition Bond, and other campaign groups have accused the UK of blocking proposals that would help developing nations tackle their crippling debt burdens, despite promises to reset relationships with the global south.
The criticism comes as world leaders prepare for the United Nations’ Fourth International Conference on Financing for Development (FfD4) in Seville (Spain) from 30 June. The week is set to see the most politically significant development negotiations of the decade.
On Tuesday (18th June), world leaders in in New York agreed a draft agreement ahead of the conference. But it has received heavy criticism from aid groups. “It falls far short of the ambition needed to address the worsening debt and climate crises, poverty and inequalities in the global south,” according to the European Network on Debt and Development (Eurodad).
Negotiations for it began with “ambitious language on sovereign debt architecture reform, international tax cooperation and international development cooperation, and development finance more broadly” – but it has been “significantly weakened during negotiations, with many meaningful action-oriented commitments diluted due to the policy priorities of Global North governments,” a Eurodad spokesperson said.
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Jean Saldanha, Director of the European Network on Debt and Development (Eurodad) hit out at the “lowest common denominator” agreement seemingly being pushed through.
“What began as a critical opportunity to advance essential reforms that would give Global South countries a seat at the decision-making table was ultimately derailed by sustained pressure from Global North countries, including the EU and UK, to pursue their policy agenda,” she said.
The draft plan, if approved in Seville later this month, would make debt restructuring processes faster, more predictable, and development-oriented while providing developing countries with better tools and support to manage their debt burdens sustainably. Developing nations facing natural disasters would be able to pause debt repayments.
But Saldanha added: “While there is some positive language in the document, at a time when global south countries have been calling for the transformation of the international financial architecture, rich countries have once again shown their reluctance to give up their grip on the global economic system.”
Crippling Debt Crisis
The forthcoming UN conference takes place against a backdrop of what campaigners call the “worst debt crisis in history” – beyond that faced at the peak of campaigning at the turn of the millennium.
According to UN data, 48 developing countries now spend more on interest payments than on education or health, a problem affecting approximately 3.3 billion people.
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Jennifer Larbie, Head of Campaigns and UK Advocacy at Christian Aid told a press conference on Tuesday: “It cannot be overstated how much the debt crisis is systematically locking low income countries in perpetual poverty….
“African countries are spending 50 times more on external debt payments than they receive in UK aid. This is shocking. This isn’t sustainable…Urgency is needed.”
And she hit out at the UK Government’s “Jekyll and Hyde approach” to the global south.
“On the one hand, they say that they want to rebuild relationships with the Global South. They say that that’s a priority. They stated that in their manifesto, they also said that tackling the debt crisis was a priority.
“Yet, on the other hand, as we’ve heard, they are actively blocking proposals that will deliver solutions on the debt crisis right up until the final hours of the negotiations.”
African countries face particularly punitive borrowing costs, paying rates that are 2-4 times higher than the United States and 6-12 times higher than Germany when seeking international loans.
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British Blockers
Aid coalition Bond says the UK, along with the EU, is blocking language in the FfD4 outcome document that would give Global South countries equal representation in debt negotiations.
The UK is also reportedly opposing proposals to overhaul International Monetary Fund and World Bank governance structures. The current global debt system is dominated by rich countries through institutions like the OECD, which helps set international tax policy, as well as the IMF, and World Bank.
Western private lenders hold the largest share of developing country debt – even more than Chinese lenders. UK financial institutions and investors are major players given the size of the lending capital, the City of London.
Decision-making boards of international financial institutions are also dominated by representatives from the US, UK, and EU.
Debt-reform organisations and aid groups want the UK to force private creditors to participate in debt relief initiatives to ease the burden of eye-watering interest payments on developing countries.
One proposal is for the United Nations to lead efforts and force creditors to the negotiating table. But the EU has reportedly made opposition to a UN-led debt reform process a “red line”, and the UK appears to be following suit. The UN is the only forum where all countries have equal representation.
The primary reason for blocking reforms is to protect British private creditors from financial losses, according to Christian Aid.