Developing countries need a fresh round of debt relief, to prevent money urgently needed for health and education being diverted to creditors, according to a major new report commissioned by the late Pope Francis.
The Jubilee report, produced by a panel of experts chaired by Nobel prize-winning economist Joseph Stiglitz, argues for debt restructuring, along the lines of the Heavily Indebted Poor Countries initiative (HIPC).
Stiglitz told the Guardian that many developing countries are facing a “perfect storm” as they had little choice but to ramp up borrowing through the Covid crisis and subsequently faced sharply higher interest rates as central banks battled to tackle inflation.
“Now, because of Trump tariffs, there’s a global slowdown expected and that will give them even less revenue, and potentially it could lead to higher inflation and that again would lead to even higher interest rates. It’s one thing after another,” Stiglitz said.
The report warns that many governments, fearful of the consequences of default, “prioritise timely debt payments over essential development spending. This is not a path to sustainable development. Rather, it is a roadblock to development and leads to increasing inequality and discontent.”
The HIPC debt relief programme emerged out of a concerted campaign by civil society groups, including churches, calling for a “jubilee” for cash-starved developing countries.
The initiative saw more than $100bn of debt cancelled – including as a result of commitments made at the Gleneagles G8 summit, chaired by the UK.
With 2025 designated a jubilee year by the Catholic church, Pope Francis commissioned the new report, to explore how the current debt crisis could be tackled. He called last year for “an international mechanism for debt restructuring based on the solidarity and harmony of peoples.” The report will be presented to his successor, Leo XIV, at the Vatican on Friday.
The research underscores the gravity of the situation for many countries, warning: “The consequences are particularly acute in Africa, where debt distress is most severe. Approximately 57% of the continent’s population – 751 million people, including nearly 288 million living in extreme poverty – reside in countries that spend more on servicing external debt than on education or healthcare.”
The authors warn that the impact is likely to be rising poverty and malnutrition, the “erosion of hope” and “deepening social fractures”.
They also point out that the situation is more complex than in the early 2000s, when much of the debt was owed to governments, or other public sector bodies.
“The international community has a moral obligation to advance a ‘HIPC II.’ However, the challenges of implementing such a comprehensive solution today are greater than those faced during the original HIPC initiative,” the report says.
As well as debt write-offs, the report argues for a series of technical and legal changes to the global financial system, to tackle the debt crisis and prevent it recurring again.
These include backing calls for legislation in the UK, where much sovereign debt is issued, that would force private sector creditors to bear their fair share of write-offs in any debt restructuring agreement. “The private guys shouldn’t get more than the public guys,” said Stiglitz.
The authors also argue for a “no bailout clause” that would stop rescue loans offered by the International Monetary Fund to hard-pressed governments being used to pay off private sector lenders.
Governments are due to discuss debt relief at the International Conference on Financing for Development in Seville at the end of this month.
A draft outcome document was agreed this week, including a commitment to seek “an intergovernmental process at the United Nations, with a view to make recommendations for closing gaps in the debt architecture and exploring options to address debt sustainability”.
That was significantly weaker than language advocated by African governments, that would have promised “far reaching reform” of the global system and “a more comprehensive, fair and effective multilateral mechanism for preventing and resolving sovereign debt crises”.
Keir Starmer has been urged by the directors of scores of UK charities and campaign groups to attend the summit in person and back plans for debt relief.
