Why Andy Burnham should spearhead debt justice reform to confront the global crisis
Debt repayments strain public services
As Commonwealth leaders met in Antigua, Charalambous says sovereign debt was worsening prospects for people in many member countries. He also points to countries the UK will engage with at the Cop31 climate conference in Turkey.
Debt Justice research finds that nine Commonwealth countries spend more on interest payments than on health or education services. A further six spend more on debt than healthcare. Charalambous says rising interest rates, linked to wars in the Middle East and Ukraine, have increased pressure on low-income countries and reduced access to medicines and schooling.
Potential gains from debt relief
Debt Justice estimates that limiting debt payments to 10 per cent of government revenue across 21 Commonwealth countries in crisis could help 9.8 million children remain in school. The additional healthcare funding could save 115,000 babies’ lives and as many as 13,000 mothers’ lives, the research says.
Charalambous argues that such gains depend on making debt restructuring workable. He says private lenders now make up the largest lender group for low-income countries, and that 90 per cent of these debts are governed by English law because of the City of London’s role.
Changing rules for private lenders
Charalambous welcomes Burnham’s stated plan to launch a new drive on debt, and urges him to reform domestic law on how private lenders deal with countries in debt distress. He says current rules can allow creditors to delay or reject restructuring and press for harsh repayment terms.
He cites Ethiopia, which, according to the article, agreed to pay private creditors 17 per cent more in interest than country lenders to avoid the possibility of being sued in UK courts. Charalambous proposes capping creditor claims at the amount they would receive through a debt restructuring process.
A fairer approach to borrowing
Charalambous says country lenders may hesitate to take part in restructuring if they fear their taxpayers will indirectly support bank profits. A debt justice law, he argues, would put all creditors on an equal basis and curb the actions of “vulture funds,” which buy risky debt and seek repayment deals backed by the threat of legal action.
He says borrowing can help countries invest in infrastructure and develop their economies; the central problem, in his view, is an unfair system. He calls on the UK to adopt a debt justice law and end the crisis.
Key points
- Debt Justice says nine Commonwealth countries spend more on interest than on health or education.
- Capping payments at 10 per cent of revenue could help 9.8 million children stay in school.
- Charalambous says 90 per cent of relevant debts are governed by English law.
- He urges Burnham to limit private creditors’ claims during debt restructuring.