Debt repayments keep lower income countries poor and prevent them from investing in the health and energy infrastructure that could help them to adapt as the planet warms. Lower income country debt is often the result of IMF backed loans which come with structural adjustment programmes attached (austerity, privatisation, market liberalism, slashing of public wage bill etc). These programmes cripple the national economy, weakening the infrastructure and depressing wages, which in turn reduces tax revenue, leaving the country dependent upon private loans to stay afloat. This in turn leads to a downgrading of the country’s credit rating. A low credit rating means that multinational banks can then charge eye-watering amounts of interest on loans that they know the country will never be able to repay, and of which the population often has no knowledge.
This means that each time a new climate disaster hits, lower income countries plunge further and further into debt, becoming less and less able to adapt. That’s why we say that debt cancellation is essential to climate justice.
The UK is a key player in this debt cycle: of sovereign bonds owed by the 73 poorest countries, 90% are governed by English law. This means if countries default on their repayments to private creditors, they risk being sued in English courts.
Think what an impact it could have if the UK were to stop prosecuting lower income country debt!