In February, the finance ministers of the G20 countries met to discuss the challenges facing the global economy. It was a missed opportunity to help Sri Lanka, a country on the frontline of the debt crisis that has plagued dozens of countries around the world in recent years.
It was disappointing that the final chairman’s summary and final document paid only lip service to easing the challenges faced by people in Sri Lanka.
While acknowledging the “urgency to address global debt problems” and “looking forward to a rapid resolution of Sri Lanka’s debt situation”, no concrete commitments or action were taken.
The G20 countries include Sri Lanka’s top bilateral creditors, including China, India, Japan and South Korea; as well as influential members of multilateral creditor organizations, including the United States and European countries. If this group worked together effectively, it could make debt relief available to Sri Lanka and strengthen the protection of people’s economic and social rights during a moment of crisis.
Because while the news cycle may have moved on, the economic crisis in Sri Lanka is still raging and has a devastating impact on people. High inflation and limited social protection, combined with difficulties in accessing basic needs such as food and health care, take a heavy toll on their lives and rights.
For example, according to the World Food Program in December 2022, one in three households was food insecure. contraction is likely.
Sri Lanka’s debt burden erodes the government’s ability to ensure human rights. Public debt-to-GDP rose from 93.6 percent at the end of 2019 to 114 percent at the end of 2021.
Even before the economic crisis hit international headlines, Sri Lanka was a global outlier in the amount it spent to pay off its debts. In 2020, before the most recent crisis, a whopping 71.4 percent of government revenue was spent on paying interest, compared to a global average of 6 percent and a regional average of 21.1 percent.
Interest payments are the largest category of government expenditure, and many new government borrowings were used only to pay the interest on previous loans from Sri Lanka.
By paying off this debt, the government is less able to spend money on sectors such as health care, education and social protection, which directly affect people’s well-being. A survey this month found that half of Sri Lankan families are being forced to cut down on their children’s food.
It is essential to free Sri Lanka from this debt trap, to break a spiral that is eroding the human rights of too many of the island’s 22 million inhabitants.
The Sri Lankan government is currently engaged in complex debt negotiations, which are essential to access financial assistance from the International Monetary Fund. The IMF struck a staff-level deal with the government last year, offering to borrow about $2.9 billion. However, the terms of the IMF deal required sufficient guarantees of debt restructuring and forgiveness from Sri Lanka’s creditors before the loan was finalized and the money disbursed.
While IMF funding may be the reason Sri Lanka’s debt is in the news today, creditors should focus on debt resolution so that economic and social rights can be better guaranteed. Previous IMF programs included conditions that had negative human rights implications, such as government spending cuts and other austerity measures. Workers in Sri Lanka recently went on strike against measures taken by the government to supposedly secure IMF funding, such as increased taxes.
Sri Lanka’s debt negotiations are complicated for several reasons, including the many parties involved. Nearly half of Sri Lanka’s total external debt is in open market bonds and is partly owned by private entities such as hedge funds. One of these private creditors has already taken the government of Sri Lanka to court for debt repayment. Then there are the bilateral creditors, and some debts are also held by multilateral institutions such as the Asian Development Bank and the World Bank Group.
While some progress seems to have been made in these negotiations in recent weeks, no solution seems to be in sight. Due to a lack of transparency about how the talks are being conducted, it is unclear what the blockages are and how long the process may take.
It is important how these negotiations are conducted. The mere fact that Sri Lanka’s existing debt payments are so heavy raises questions about how such agreements came about in the first place. Transparency, participation and accountability are essential to ensure that the current crisis does not repeat itself.
Sri Lanka’s creditors cannot be guided by their commercial or national interests alone. like a Amnesty International report As regards the economic crisis in Sri Lanka from October 2022, international financial organizations, multilateral development banks and private companies have obligations and responsibilities to respect international human rights.
As these negotiations progress, the restructuring and debt cancellation should allow Sri Lanka to service its external debts without compromising its ability to fulfill its human rights obligations, and the economic and social rights of the people to ensure. All debt relief options should be on the table, including debt forgiveness if necessary.
Urgent coordinated international action is essential to ensure that the Sri Lankan government can effectively address the crisis and protect people’s rights. It has been almost a year since Sri Lanka first defaulted on its debts, and six months since the IMF staff-level agreement was reached.
Further G20 meetings are scheduled for this year, which should prioritize debt relief for Sri Lanka in line with human rights standards. Postponing decisive action in Sri Lanka will only delay recovery and increase the human suffering experienced by people in the country.
The views expressed in this article are those of the author and do not necessarily reflect the editorial view of Al Jazeera.
