In early February, at a Vatican conference on the global economy, Pope Francis gave an unscheduled address on debt relief. Speaking to the heads of the IMF and World Bank, as well as government officials from around the world, the Pope called for attendees to “help developing countries to achieve debt sustainability, through coordinated policies which should finance debt and reschedule debt.”
Many interpreted the speech as an intervention in the politics of Francis’s native Argentina: at the time, the IMF and the Argentine government were in talks about the restructuring of the country’s $311 billion national debt. But the Pope’s remarks have appeared more widely applicable with the emergence of the coronavirus pandemic, which is now jeopardising public health systems and national economies.
The IMF’s own analysis predicts that the impending global recession will be the worst since the Great Depression, resulting in global public debt rising from 69% of national income in 2019 to 85% in 2020. Debt campaigners have highlighted the threat this presents to a developing world trying to wrestle with the pandemic, since poorer countries were already spending more annually on external debt payments than on their own health systems.
Church leaders have, therefore, continued to implore governments and lenders to commit to debt relief amidst the coronavirus pandemic. In late March, Cardinal Luis Antonio Tagle of the Philippines discussed the biblical concept of a “jubilee” year as a means to address the crisis: “Could the Coronavirus-19 crisis lead to a jubilee, a forgiveness of debt so that those who are in the tombs of indebtedness can find life?”
On April 8 Jubilee USA, an organisation borne out of Pope John Paul II’s own calls for a jubilee of debt forgiveness, co-wrote a letter with the United States’ Catholic Bishops calling on “the G20, the IMF and World Bank, to suspend debt payments for developing countries” and “restructure debt to eliminate vulnerabilities, ensure sustainability, and reduce poverty.” Then Pope Francis returned to the subject during his Easter Sunday Urbi et Orbi address, pleading for “the reduction, if not the forgiveness, of the debt burdening the balance sheets of the poorest nations.”
From the outset of the pandemic, the IMF and World Bank supported a moratorium on poorer countries’ debt payments to other countries. The policy was approved by G20 member states, and the IMF itself proceeded to cancel $214 million in debt repayments owed by its 25 “poorest and most vulnerable” member states. But there remains great concern that these poorer states will still have to repay debts to other creditors – banks and other financial institutions.
Jubilee USA and other organizations responded by calling for the IMF and World Bank to pursue a “cancellation of all external debt payments due to be made in 2020”. Such a “jubilee” of payment cancellation, even for the poorest countries alone, would constitute hundreds of billions in debt relief. But Eric LeCompte, executive director of Jubilee USA, insisted that this is precisely what is required: “The IMF thinking is too small on the amount of debt relief needed.” Speaking to the Herald, LeCompte said that “we’ve seen progress on many of our Jubilee USA efforts on debt relief” but “over the next few months, we’ll need to achieve much more to win aid and relief for those who need it most.”
Philip Booth, from the Institute of Economic Affairs, however, cautioned against large-scale cancellation schemes. Whilst he thought it consonant with Catholic Social Teaching “for creditors, where they can, to allow a moratorium on debt payments”, he warned that “cancelling debt could do more harm than good” and lead to “countries not being able to borrow again”.
“The Church cannot only point the finger at the creditors in these circumstances,” Booth told the Herald. “It must stress the importance of effective political institutions and prudent fiscal management so that countries do not get into debt in the first place.”
The Catholic scholar Thomas Storck agreed that “borrowers cannot be absolved of all blame in taking on debt beyond their means”, but he notes that the unjust poverty of borrowers and the “illicit persuasion” of lenders and sellers remain central factors in the debt crisis. For Storck, this means that “public authorities have the right to adjust such debt according to distributive justice to provide relief”. There are also structural injustices, Storck said, that are “best addressed in the context of a general reorganization or renewal of the economy and society”.