6. Drop the Debt – to fund education for all – a new debt crisis looms

Key issues

• A new debt crisis is looming fast, caused by Covid-19, high food and energy costs, and higher interest rates.?It is taking money away from health, education, welfare and infrastructure.
• In the 1990s and 2000s, Jubilee 2000 successfully campaigned for the G8 to write off the unjust debts of low-income countries.?Over $100Bn has been written off and a lot of it has been used to get 70 million more children into school. ?
• We need that kind of action again. In August 2021, the IMF issued $650 Billion of new credit, to help countries manage the costs of Covid.?The IMF encouraged rich countries to recycle some of that to help those countries most in need.?But it hasn’t happened yet.?It is urgently needed.

Twenty years after the success of the Jubilee 2000 Debt Campaign, a new debt crisis is looming fast.?The latest annual World Bank International Debt Report says low-income countries are spending more of their government budget on debt interest payments than at any time since 2000.??This is a result of higher interest rates, and needing to borrow more to cover the costs of the Covid-19 pandemic and the dramatic rise in the price of food and energy imports.?

Debt service payments by the world’s poorest countries are expected to surge by 35% from 2021 to 2022. ?These interests payments take money away from health, education, welfare payments and economic investments in infrastructure.

We need a new round of debt write-offs if we are to avoid a number of low-income countries either defaulting or having to impose cuts on public services which will be devastating for people living on less than ￡1 a day.? In August 2021, the IMF issued $650 Billion of new credit, to help countries manage the costs of Covid. ?But low-income countries received only 3% of the Covid IMF bailout, despite having 10% of the global population and the greatest needs.?So the IMF “encouraged voluntary channelling of some SDRs from countries with strong external positions to countries most in need.” Over a year later, this has still not been done. ?The G20 recently promised to recycle $100Bn – but it hasn’t happened yet.?It is urgently needed.

Twenty years ago, low-income countries were in a similarly precarious position. Action was taken and it was a success ?

In the early 1990s, an international coalition movement of charities, churches, students and unions in over 40 countries came together to call for the cancellation of?unjust debt by the year 2000. ?

In response, the G8 group of rich countries created the Heavily Indebted Poor Countries initiative in 1996, to cancel some of the debts of 41 of the most indebted countries.?Progress was slow. In 1998, 70,000 Jubilee 2000 campaigners held hands to form a ring around the 1998 G8 Summit in Birmingham, England (see photo above). ??But the Birmingham G8 Summit outcome on debt relief was not enough.?

It took one more heave, a year later.?The 1999 Cologne G8 Debt Initiative promised deeper, broader and faster debt relief through major changes to the Heavily Indebted Poor Countries framework. ?Five years later, in 2004, still only 14 countries had received any debt relief.

Increasing debt relief was therefore still one of the top four demands of the Make Poverty History Campaign in 2005. In some heavily indebted poor countries, governments were spending more on interest to rich countries than they received in aid, and more than they spent on education or health. ?It was also one of the issues that caused the most debate among the Commission for Africa in early 2005.?

The Commission for Africa was set up by the UK Government and Bob Geldof in 2004, to prepare for the UK’s G8 Presidency in 2005.?The 17 Commissioners included Tony Blair, Gordon Brown and Hilary Benn, the DFID Cabinet Minister. ?It included three other senior representatives from G8 countries, and nine African Commissioners from governments, private sector and civil society. ?It had just had its first meeting when I joined No 10 in June 2004. ?I brought with me a bit of reluctance from DFID about the Commission.?Who needed all this work to tell us lots of things we already knew??But it turned out to be clever.?

The Commission for Africa brought senior representatives of the G8 and Africa together to agree what needed to be done to achieve the Millennium Development Goals. ?That meant that when the G8 “Sherpa” negotiations started in earnest, we weren’t negotiating on what had to be done.?The only real question for the G8 was whether it had the political will, and if it would provide the funds necessary to do what we all knew needed to be done.?When I drafted the G8 Communique in early 2005, I mirrored the recommendations of the Commission for Africa report very closely. ?If the Commission for Africa recommended it, it usually went in my draft G8 Communique.?If the Commission for Africa recommended it, we asked, why would the G8 not agree to it???In the end, the Gleneagles G8 Communique’s included over 50 of the Commission for Africa’s 90 recommendations.?I wrote this comparison in the middle of the night in Gleneagles and we published it on the last day of the Summit.

That meant it was really important that the Commission for Africa included all of the key points we wanted to agree at Gleneagles.?And debt was a difficult negotiation in the Commission.?We wanted the Commission to recommend 100% debt cancellation for Africa.??But one of our commissioners did not.?Michel Camdessus was President Chirac’s Africa Personal Representative for the G8 and a member of the Commission. He had also been the Managing Director of the IMF for 13 years and he had some very strong views on multilateral debt.?In particular, he did not want to say all debt is bad.??He said some of the debt held by African countries was good, appropriate and affordable, and cancelling it would ruin their credit ratings.?The argument went all the way to the wire.?

I remember juggling three phone lines one evening at No 10.?I had Bob Geldof on one line insisting that the Commission must recommend 100% debt cancellation for Africa.?I had Camdessus on another line saying he would not agree to that.?And Myles Wickstead was on the third line, waiting for the green light to print the report.?Myles had already written DFID’s 1997 White Paper and was running the Commission for Africa process.?He was literally at the printers.?We were over the deadline.?And I was still negotiating.?I was going back and forth between Geldof and Camdessus to see if I could get them to agree, and periodically reassuring Myles I just needed a few more minutes as he got more and more nervous that the printers were just going to close for the night. ?Having listened carefully, and multiple times to both of them, I finally came up with three words that I hoped would work.?I said to Camdessus, “I understand why you don’t want to give debt relief to countries that don’t want it, but presumably you agree that we should give it to all the countries that do want it.”?I suppose so, he said.?I switched to Geldof’s line. “I understand why you want to give debt relief to all African countries, but presumably you don’t want to force it on any country that doesn’t want it.”?Geldof speaks less diplomatically than Camdessus but his response had the same meaning.?I gave Myles the green light.?The Commission for Africa recommended: “For poor countries in sub-Saharan Africa which need it, the objective must be 100 per cent debt cancellation as soon as possible.”?

Getting France on board was a breakthrough, but debt relief is billions of dollars and getting all of the G8 Finance Ministers on board was still not easy.?Cancelling debt is a Treasury responsibility. Gordon Brown led the UK G8 Presidency effort to increase debt relief in 2005. He was encouraged and counselled by his Special Adviser, Shriti Vadera.? They deserve most of the credit. Once again the USA was a sticking point. The US wanted the IMF and World Bank to pay for the debt relief, but it looked to us like this would have a knock-on effect of reducing development assistance from the World Bank to those same countries. Effectively they’d be paying for their own debt-relief! ?Brown argued that the G8 should provide extra funding to pay for the debt relief. But the US saw problems with our approach too. A week before the G8 Finance Ministers meeting, the US Treasury Secretary had still not agreed, and we took Blair to Washington to see President Bush. Our first objective was to agree debt relief.?It was massive and it would also mean we could move on to the rest of the Gleneagles development agenda.

What happened next is described in Anthony Seldon’s biography, Blair Unbound, (2007, pp.364-6):?

“Just before Blair’s arrival at the White House, Bush was briefed on the situation: ‘Mr President, the truth is that our Treasury’s getting nowhere on the debt relief language…’ Bush replied, ‘Well, the Prime Minister’s going to be here in half an hour. You’d better fix it.’ NSC staffer, John Simon left the Oval Office immediately and tracked down his counterpart at No 10, Laurie Lee. ?He said, ‘Look, your guy’s going to be here any second and we don’t have a deal on this. Isn’t this insane?’ Lee replied, ‘Let’s work this out.’ By the time Blair arrived at the White House, a text had been drafted and approved… just a foot away from the threshold of the Oval Office.”

Five days later, Gordon Brown and the G8 Finance Ministers announced an additional $22bn of debt relief for 18 countries, leading to the big spike in official development assistance you can see in 2005-06 in chart 7 in the article on Aid.

37 countries have now received well over $100bn of debt relief. The World Bank calculates that in the countries that have benefited from debt relief, expenditures on education, health, and rural infrastructure, increased on average 60% in real terms from 6.5% of GDP in 2001 to 10.4% of GDP in 2013.?

Funding Primary Education for All

Over this period, we have seen good progress on primary education, partly enabled by debt relief. In 1997, one in 6 children globally did not go to primary school, and more of them were girls than boys. Millennium Goal 2 was for all children everywhere, boys and girls alike, to complete primary school. By 2015, enrolment was up to 91% but it has plateaued there, which means 70 million children are still missing school, and they are still more likely to be girls than boys. ?Many of them are in countries affected by conflict, where enrolment is much lower. I have seen myself with CARE in Yemen how schools are sometimes bombed during wars or turned into temporary housing for people who have lost or fled from their own homes. ?

Increasingly, focus is shifting to the quality not just the quantity of education. Adult literacy is only 85% and, in some countries, it is less than half.?At CARE, we partnered with the DFID Girls Education Challenge to address these twin challenges. Ensuring girls start and stay in school and that they get a good quality education, leaving with literacy, numeracy and learning & life skills to go on to the next stage of education, training or work.

Despite Prime Minister Johnson’s claiming this was his #1 priority for UK aid, the his government cut funding for girls’ education by 16%, as part of the 2021 aid cuts. ??That needs to be urgently reversed if the UK is to contribute to achieving Global Goals 4 and 5.

A new debt crisis looms

There are people who might argue that we paid off the debts of low-income countries twenty years ago and now we are right back where we started, so it doesn’t work.?But that’s not really true.?First of all, a lot of those debts from the 1970s and 1980s were loaned by rich countries to dictators in exchange for cold war loyalty, in the full knowledge the money would not be invested productively.?We never deserved to get the money back.?The money given in debt relief in the 2000s was invested very productively, in education and other things.?The current debt crisis is not the result of bad economic management, corruption or geopolitics, except in a few cases.?Primarily, it is the result of countries having low-incomes, and then being hit with higher costs of Covid, the energy and food price crisis, and now higher interest rates.?The IMF is absolutely right when it said countries with stronger external positions should help countries most in need by urgently recycling SDRs to provide debt relief. ?This must happen in 2023.?

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