Are the SDGs compatible with a world full of debts?

The IMF and World Bank are known to many as inhibiting the development of developing countries in Sub-Saharan Africa and Latin America due to the implementation of Structural Adjustment Policies. Will the same fate hold for them when the Sustainable Development Goals are launched? Anastasia Nicosia analyses the SDGs in this respect, with a particular focus on SDG 17.4. 

The Sustainable Development Goals (SDGs) will be launched at the end of the year. By replacing the Millennium Development Goals (MDGs) they will set the humanitarian and development agenda for the next 15 years. What will the launch of the SDGs mean for projects and processes of social change in the global south? To determine whether the launch of the SDGs will have a positive or negative impact on the Global south, I will highlight the importance of SDG 17.4, which stresses the importance to “Assist developing countries in attaining long-term debt sustainability through coordinated policies aimed at fostering debt financing, debt relief and debt restructuring, as appropriate, and address the external debt of highly indebted poor countries (HIPC) to reduce debt distress”.

Debt, as a form of both assistance and coercion, has a long history. The World Bank and the International Monetary Fund (IMF) have been offering loans for more than 40 years, loans that did not come free of charge. Indeed, not only were they trailed by high interest rates, but they also came attached to the so-called “Structural Adjustment Programmes” (SAPs), which consisted of various conditionalities shaped by the Washington Consensus, a neoliberal framework that promoted privatisation, deregulation and the entrance into the free market as ways to achieve economic growth. The premature introduction of these borrowing nations into the “free” market has not favoured their economic growth. As a consequence, they cannot pay back their debts. They then have to ask for more loans, which come attached to more conditionalities, and ultimately continue on promoting the interests of the market and not of the particular nation, therefore leading to more poverty and less ability to repay debts. In order to achieve real economic growth in developing and less developed countries, with its subsequent political and social development, this vicious cycle has to end. Debt relief is the first step towards this brighter future for the Global South.

This indicates that if target 17.4 is met, then the launch of the SDGs will have a positive impact for the projects and processes of social change in the Global South. If it is not met, the SDGs will further destroy the already precarious budgets of these countries, as they will have to shift their spending away from their citizens, and towards not only repaying debts but now also towards achieving the Goals.

In July 2015, in Addis Ababa, developing countries tried to obtain new debt resolution rules within the SDGs. The result of these negotiations was SDG 17.4.

Two things should be noted regarding this target. First, even though the vote was successful, “it was opposed by six creditor governments, including the US and UK, which are legally responsible for more than 80% of international debt” (Jones, 2015). Second, the G77 countries, some of which include developing indebted countries, would have wanted to frame the last part of the SDG as cancel external debt of Highly Indebted Poor Countries (HIPC) to reduce debt distress.” However, the term ‘cancel’ was substituted for ‘address’ demonstrating the creditor countries’ reluctance to tackle this problem.

By maneuvering target 17.4 in their favour, developed countries are turning the launch of the SDGs into a negative phenomenon for projects and processes of social change in the global south.

A similar target to SDG 17.4 was set out in the MDGs. As a consequence, debt was written off for several countries, but many others were rejected from the debt dissolution plan as they “were deemed ‘too rich’, others not indebted enough, and some…were simply unwilling to follow free-market policies prescribed by the IMF and World Bank” (Jones, 2015). To be more effective than their predecessors, the SDGs should aim to forgive more debts.

The United Nations Development Programme (UNDP) in 2003 had already highlighted that “if poor country governments are to have sufficient resources to meet the MDGs, as well as to meet other essential expenditure needs and pro-poor investments, the 42 HIPC countries as a whole cannot afford to make any debt service payments”. Hence, if debt in some parts of the global South is not extinguished, there is a risk that most SDGs will end up being unachievable.

Moreover, empirical evidence shows that with debt cancellation come many benefits, as states are freer to use their budgets for welfare purposes. Jones (2015) reports that in Mozambique, “following debt cancellation… primary school completion increased from 15% of children in 1998 to 60% in 2009”. Not only does this show the correlation between debt cancellation and positive social change, but it also demonstrates that debt relief would actually enable more SDGs to be met, as for example SDG 3 focuses on achieving universal education.

To conclude, debt relief should be on the top of the SDG agenda; only by firstly achieving this can all the other goals be met. This, in turn, will ensure that SDGs will have a positive effect for projects and processes of social change in the global south, and not be another economic issue to focus on, as we have seen with the Mozambique example.

 

 


The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.

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