10. Resolving debt crises (2): conditionalities, structural adjustment & economic recovery
Even where debt relief is offered – in the form of restructuring, cancellation or a moratorium – it is often done so with stringent conditions attached to it. The conditions attached to loans are based on the neoliberal model, under which excessive debt is caused by excessive government spending, and a failure to maintain a ‘balanced budget.’ However, there are many cases where countries cut public spending – often as a result of loan conditions – but debt continues to increase. Between 2014 and 2016, in 39 low- and middle-income countries, government expenditure on healthcare decreased, while expenditure on debt repayments increased.
Because women rely more on social protection programmes, conditions which cut these programmes have a disproportionately large impact on women. Women are also more often employed in the public sector, and so they are disproportionately impacted by cuts to wages or jobs in this sector. See the ‘Women and Economic Empowerment’ FreshUp article for more on this topic.
Although there is official recognition that these conditions have not worked in the past, in reality conditions continue to be attached to even the most minor forms of debt relief. As recently as March 2020, David Malpass, the President of the World Bank, stated in relation to possible debt moratoriums for developing countries affected by Covid-19, that “Countries will need to implement structural reforms to help shorten the time to recovery and create confidence that the recovery can be strong.”
Many civil society campaigners for debt justice object to demands for conditionalities, and some have argued that it would be better for countries facing humanitarian emergencies because of Covid-19 to declare unilateral debt moratoriums, than to accept debt moratoriums from lenders with ‘strings attached’ which would further weaken their public services, and therefore their ability to tackle the virus.
