An Appeal For The Immediate Cancellation Of South Asian Countries’ Debts

The coronavirus has unveiled the spectre of a larger crisis. A majority of the planetary economies were already in the throes of over-production, stagnation and even, a recession, which deepened with the day since the sub-prime crisis of 2008-09. The pandemic has exacerbated the situation. The unemployment figures are rising every day and it is estimated that many small businesses and even a few business corporations will be bankrupt. This health crisis and its cascading economic consequences could well plunge many countries in the South into an unprecedented crisis, pushing millions of people into poverty.
We will be entering a new debt crisis. Already, in July 2019, the IMF reported that among low-income countries, 9 are over-indebted and 24 are close to that situation. The external sovereign debt in countries of the South is a source of concern, notably because of its dramatic increase within the last two decades and also, due to the similarities with the pre-crisis debt situation of Third World countries in the 1980s. Additionally, the economic crisis means that export-dependent southern countries will find it difficult to earn hard currencies, the remittances are going to reduce significantly and, low financial investments. This will put enormous pressures on the capacity of these countries to service existing debts. The governments will also bail out private corporations adding enormous pressures on the public coffers.

South Asia, is no exception and faces a similar situation. The region faces enormous challenges to deal with the COVID-19 and post-pandemic situations. The major concern for the region is, obviously, the frail healthcare systems. The daily news of death and infection has intensified the virus fears compounded by the absence of a viable public healthcare system. This is coupled with the widespread poverty, vulnerability, insecurity and precariousness that will surely get amplified with the spread of the pandemic. A gloom surrounds as we complete more than two months of lockdown.

In the region, this disaster is exacerbating the already existing insecurity and precariousness. The region’s public healthcare infrastructures lack the capacity to deal with a pandemic, of such a scale. Due to rampant privatisations carried over the last three decades. South Asia is far deficient of adequate healthcare standards including doctors, nurses, midwives, hospital beds, primary health centres and others. The overwhelming majority of the population do not have access to public healthcare and private healthcare systems during COVID- 19 turned to be more irresponsible and unaccountable by closing the doors for COVID- 19 infected people behaving them as vectors for their hospitals. This has resulted in difficult access to healthcare facilities, particularly women, children and other disadvantaged groups in the society.

Apart from healthcare threats, millions of migrant workers and daily wage earners, across the region, were stranded for months, helplessly, miles away from home, staring at an uncertain future without money, food or jobs. According to the ILO, almost half the global workforce – 1.6 billion people – are in immediate danger of having their livelihoods destroyed. It is clear that South Asia will have a disproportionate share of such impacts as the regional economies houses the largest number of the precarious workforce on the planet. For millions of workers, no income means no food, no security and no future. Millions of businesses around the world are barely breathing and the smaller ones have the least recourse to necessary resources in times of such dire crisis. The self-employed and contract workers are also in imminent danger of seeing their livelihoods disappear.

The multifaceted dangers due to the pandemic can only be faced by rebuilding public healthcare systems, strengthening social protection measures including unemployment benefits and livelihood compensations, especially to those in the informal economy and others who are vulnerable. This would entail a huge public expenditure and investments in the social sector, something that has been done away within the last four decades.

The complications are compounded by the public external debt of the regional economies that has almost doubled between 2009 and 2018, from US$ 366.201 billion to US$ 730.063 billion. This debt is imposed by the international financial institutions (WB and IMF) with the complicity of the ruling classes in our countries. It is noted that most countries spend a huge proportion of their revenues in debt servicing with Sri Lanka and Pakistan having the highest debt to GDP and also, the debt to revenue ratio. The debt crisis will exacerbate an already bad condition with respect to the capability of these countries to pay back their loans. South Asia itself was already one of the poorest regions. If the present debt burden is not relaxed, the countries in this region will be more vulnerable and trapped in crisis.

As it stands now, the debt crisis has a self-reinforcing dynamic. The rise in debt service and the deterioration in investment in developing countries will resulted in net resource transfers from the developing countries to the developed countries. This will prevent domestic capital formation and will also result in a drain on valuable foreign exchange earnings.

Any effective fight against the COVID-19 pandemic requires huge resources and therefore, the limited resources of the South Asian countries should be devoted to fight the pandemic rather than reimbursing international creditors. Under these circumstances, we demand the cancellation of all illegitimate debt of the South Asian countries. The UN body dealing with trade, investment, and development issues, the UNCTAD also recognises that the debts of many countries in the South must be written off. It has also clarified that debtor countries can unilaterally declare themselves in the suspension of payments without creditors being able to demand arrears in the future.

The cancellation of external debts of the countries of the region would enable them to free vital resources for rebuilding public healthcare infrastructure, as well as other urgent needs in this economic environment, threatened by sharp drops in income, loss of taxes and revenues and increased expenditure.

It is also necessary to embark on a developmental path that prioritises peoples’ needs over the interest of the powerful and the propertied class. The resources for such developments could be generated through the cancellation of public debts. A citizen audit is also necessary to identify illegitimate, odious and illegal parties and demand their repudiation. The legal arguments of the state of necessity, a fundamental change of circumstance and/or force majeure could be invoked to support such unilateral sovereign repudiation.