The collapse of the global economy and subsequent recession has profoundly impacted the global South. Decreased foreign direct investment, shrinking national budgets, and rising costs of living have pushed 119 million more people into extreme poverty since 2008. Women and children are the most vulnerable to this financial downturn. Furthermore, economic insecurity all too often leads to civic unrest and is a threat to stability.
In light of this financial crisis, the Washington Office selected four policy issues to highlight over the next year through our “Abundant Life: Economic Justice for All” campaign.
This issue of the Memo investigates the impact that debt to international financial institutions (IFIs) has had on impoverished countries. From Haiti to Afghanistan to Bolivia to Uganda, people all around the world have been severely affected by the burden of debt incurred and carried by their governments.
Debt repayment consumes the scarce resources of impoverished governments from vital health and education services. Countries such as Eritrea and Nepal need to invest their limited budgets in programs that will strengthen infrastructure and lead to economic empowerment and a better standard of living, rather than paying millions of dollars in interest. This misallocation of government funds has led to a proliferation of poverty for the world’s most economically disenfranchised.
Advocates for debt relief have enjoyed considerable success. In 2005, the U.S. Congress cancelled debt for the most severely indebted countries, and the International Monetary Fund has overseen complete debt forgiveness initiatives in many nations.
Despite this success, much work remains. The current financial crisis has forced some countries into new debt with IFIs. Others still struggle under the burden of interest rates and debts incurred decades ago. Further, the International Monetary Fund and World Bank still employ policies that tie detrimental conditions to loans.
Debt cancellation is fundamentally about restoring right and just relationships between impoverished and wealthy countries. Indeed, debt is just one component hampering global economic development. The fight against HIV/AIDS, environmental degradation, gender inequality, unjust trade regulations, and illiteracy are but a few of the challenges facing developing countries.
However, debt cancellation is a step forward in promoting economic justice around the world. Join us in proclaiming Jubilee, a new beginning for all.
