The grandly titled United Nations (UN) Summit of the Future officially takes place on 22-23 September. The UN is billing the Summit as a ‘once-in-a-generation opportunity’ to build ‘a new international consensus on how we deliver a better present and safeguard the future’.
There can be little doubt that such a Summit is sorely needed. In many respects, our planet is characterised by inadequate cooperation in the face of deepening disasters. One of these disasters centres on debt burdens facing many countries in the Global South, which prevents the governments of these countries from investing in the Sustainable Development Goals (SDGs). This debt disaster aggravates other disasters, including the global malnutrition disaster, which sees a staggering 2.8 billion people unable to afford a healthy diet.
New research published today by Results UK finds that the 16 countries most affected by food crises spent just over $40 billion on foreign public debt payments last year. An illustration of what this means in practice is the fact that the governments of these countries spend around double on foreign public debt payments than they do on all healthcare.
Food insecurity and debt
Although the UN Summit’s draft outcome document recognises the link between food insecurity and debt problems, it is inadequate in its current state. On the plus side, the draft text calls for a ‘review of the sovereign debt architecture’ that includes exploring proposals for ‘effective, efficient, equitable and comprehensive multilateral debt mechanisms’. Yet these positive words are overshadowed by the draft’s championing of the G20’s failed approach to managing debt crises, known as the Common Framework.
The UK parliament’s International Development Committee is one of many entities around the world to have criticised the Common Framework. As countries such as Chad and Zambia have discovered, not only is the Common Framework untransparent and slow, it does not have an enforcement mechanism and it is not aligned with the SDGs.
Foreign Secretary David Lammy and Development Minister Anneliese Dodds must join calls for a UN sovereign debt restructuring mechanism. This truly has the potential to be ‘effective, efficient, equitable and comprehensive’. Shamefully, the UK actually voted against such a mechanism at the UN almost a decade ago, so it is high time that this mistake is corrected.
Debt justice
The Government should also work with international partners on other measures to further the cause of debt justice. One example is a UN automatic debt cancellation mechanism for Global South countries affected by economic shocks (e.g. soaring food prices due to high inflation) or emergencies (e.g. crop failure due to droughts). Another example is reforming the controversial International Monetary Fund so that its influential work on debt is centred on the SDGs.
However, it is important to recognise that there is much that the UK can do for global debt justice using its own laws. How so? The key to understanding this is recognising that 90 per cent of foreign currency bonds owed by the poorest countries are governed by English law.
That gives the UK – specifically Rachel Reeves as Chancellor of the Exchequer – unique power in the global debt system. The Chancellor must amend existing laws, such as the Debt Relief (Developing Countries) Act 2010, in order to ensure that Global South governments with loans governed by English law enjoy comprehensive protections from unfair lawsuits brought by greedy companies exploiting debt crises, rather than the limited protections they currently possess.
Corruption scandals
The Chancellor should also ensure that loans governed by English law are fully transparent and in accordance with all relevant laws. This will help to prevent corruption scandals such as the one involving certain Credit Suisse loans to Mozambique. This resulted in the Financial Conduct Authority fining the investment bank in 2021, but by then huge damage had been done to the Mozambican economy, the effects of which are felt to this day.
It is important to note that action on debt justice is not a substitute for action to ensure that the UK’s ‘aid’ is of sufficient quantity and quality. The new Results UK report argues that the UK was once a leader in terms of the amount it invested in global nutrition, and it should seek to return to this position. Moreover, while the quality of the UK’s funding for nutrition programmes is often good, there is definite room for improvement, especially when it comes to consistently listening to excluded people and reducing inequality.
Labour’s manifesto committed to ‘tackling unsustainable debt’ and ‘restoring development spending’. Ultimately, global debt justice and more and better ‘aid’ would unlock huge funds. Some of this money could be spent on tackling the scourge of malnutrition around the world. The good news is that we know about the sort of interventions, such as providing vitamins and minerals for pregnant women and supporting breastfeeding, that can massively boost nutrition for relatively little investment.
Starting this weekend at the UN Summit of the Future, the UK needs to take the lead in working for truly progressive debt and ‘aid’ policies. This can empower the governments of Global South countries to have the finances they require to properly invest in the future of their people.
Sunit Bagree is Senior Policy Advocacy Officer at Results UK