Presented by Eleanor Crook Foundation
Debt has become one of the top development issues of the day. The question is whether there is enough willpower to lighten the load for debt-strapped countries.
Also in today’s edition: U.S. President Donald Trump sets his sights on philanthropies and nonprofits, forcing them to formulate a game plan to fight back.
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The Group of 20 major economies is trying to chip away at the mountain of debt that’s weighing down global south economies. Under the South African presidency, the G20 made some headway recently by reaffirming support to strengthen the bloc’s existing debt restructuring program, known as the Common Framework.
It is the first time a declaration on debt has been issued since the COVID-19 pandemic, and the only topic on which finance ministers from all G20 countries — including the United States — reached enough of a consensus for a communiqué, my colleagues Elissa Miolene and Adva Saldinger write.
Finding any kind of multilateral consensus in today’s deeply fractured world is an accomplishment in and of itself. The Common Framework has also been credited with bringing together Paris Club and non-Paris Club creditors — including China — creating a coordinated process for restructuring low-income countries’ debt.
But critics say the G20 needs to set the bar higher, especially for the Common Framework, which has been derided as too slow, too limited, too late, and too creditor-friendly.
Zambia is often used as the poster child for the framework’s faults: The country’s restructuring process took more than three years after its default and reportedly cut debt by about $900 million — a fraction of what analysts said was needed.
And urgency is what’s needed, not just for struggling debtors, but for the world.
“This should be giving ministries of finance all around the world anxiety,” says Eric Pelofsky of The Rockefeller Foundation. “The important thing is this is not simply that the global south burns down and nobody cares. This is something that would affect the global economy.”
“The G20 understands that if we don’t fix the global debt problem, we’re not going to return to strong economic growth,” says Eric LeCompte of the Jubilee USA Network. “We see the promise of the G20 coming together at this time and reiterating their commitment to dealing with debt, and that’s incredibly important. But we need the G20 to do more.”
Read: G20 recommits to debt relief — but critics say it’s far from enough
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Ideas for how the G20 Common Framework can ease Africa’s debt burdens were bandied about at Devex Impact House on the sidelines of the World Bank-International Monetary Fund annual meetings.
Daouda Sembene of AfriCatalyst suggested that countries going through the Common Framework should be granted an automatic suspension on their debt repayments.
“[That] at least pushes the creditors to be incentivized to come up with a solution,” he said. “Otherwise, the process drags on.”
Speaking to me in the Pro Content Studio of Devex Impact House, Sembene also pointed out that the Common Framework doesn’t spell out that official creditors, such as governments or multilateral lenders, and private creditors, such as bondholders or commercial banks, should be treated equally and simultaneously during debt restructuring.
Right now, countries must often reach an agreement with official lenders before private creditors come to the table, a sequential approach that critics say has led to years of delays. By contrast, parallel negotiations would ensure that all creditors are working from the same information and expectations, making it easier for all lenders to share the burden of debt relief fairly.
Sembene, who served as an executive director at IMF, added: “We need to find ways to incentivize those private creditors to be part of the conversation when it comes to debt restructuring, or when it comes to, really, debt resolution in general.”
Read: Experts press G20 to make debt relief faster and fairer (Pro)
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Critics of Trump say the U.S. president has it out for philanthropic foundations and nonprofits that he deems to be progressive — a grudge that’s spawned the threat of criminal charges against left-leaning charities.
The administration has lodged a number of criminal allegations against organizations in the sector, writes Devex contributing reporter Rebecca Root.
“These accusations are politically motivated attacks on civil society, meant to silence speech the administration disagrees with, and undermine the First Amendment right to free speech. When power is abused to take away the rights of some people, it puts the rights of all people at risk,” the Open Society Foundations — a prime Trump target — wrote in a statement.
So what’s a philanthropy or nonprofit supposed to do when staring down a justice system they say is politically rigged?
So far, the response has largely been a series of statements either from individual organizations or collectively. Some say that’s not enough.
Writing in Nonprofit Quarterly, Tonya Allen of the McKnight Foundation, Deepak Bhargava of the Freedom Together Foundation, and John Palfrey of the MacArthur Foundation urged organizations to join a solidarity campaign called Unite in Advance so that they avoid being “sitting ducks.”
“We must prepare and unite to defend our freedom to support the millions of people who rely on charitable foundations to build stronger, healthier communities and opportunities for all,” the foundation presidents wrote. They called for nonprofits and foundations to prepare crisis plans and legal teams, to speak up, and to increase giving. “Foundations must lead — not just with grants, but with guts.”
Read: What is Trump doing to US nonprofits and philanthropies? (Pro)
ICYMI: Trump’s scrutiny of nonprofits escalates, with Soros’ OSF at the center
Speaking of solidarity, the grantmaking organization Grassroots International wants philanthropies to exhibit more of it toward burgeoning social movements.
These movements also offer philanthropies an opportunity to atone for past sins. Grassroots International criticizes 19th-century industrial titans such as Andrew Carnegie and John D. Rockefeller for building their wealth in part by exacerbating inequalities.
Funding and advocating for social movements today could be a way of “reversing wrongdoings by returning wealth to the communities from which it was extracted,” Grassroots says.
Read: Should philanthropic organizations partner with social movements? (Pro)
Are there parallels between the destruction of Gaza and the obliteration of USAID? James Kunder, a principal at Kunder-Reali Associates who previously served as deputy administrator of USAID, thinks it’s not a stretch.
“The first act of destruction created a reconstruction challenge of almost unfathomable proportions: more than 140 square miles of rubble, strewn with corpses, unexploded ordnance, and deadly contaminants of every kind, filled with some 2 million people facing hunger, sickness, and unemployment with no functioning government or services,” he writes in an opinion piece for Devex.
“The second act of destruction, spawned by the Department of Government Efficiency, or DOGE, assault on USAID earlier this year, substantially dismantled the U.S. government tool kit to fix such problems,” he adds, pointing out that “U.S. leadership in reconstruction … has been viewed as a cost-effective investment to avoid even heavier taxpayer costs for resurgent conflict.”
Kunder argues one lesson from past reconstruction campaigns is that specialized teams and highly technical skills are needed to “have any chance of success in rebuilding from the war’s rubble. And it was USAID that provided those experts.”
That’s why he believes that Trump’s “Comprehensive Plan to End the Gaza Conflict” is on shaky ground. “History teaches that Gaza will be only the first instance where U.S. policymakers will confront a new reality,” he writes, “a serious mismatch between our aspirations to rebuild abroad and the now-jettisoned tool kit to actually do it.”
Opinion: The destruction of Gaza and USAID represents a dual challenge for the US
The European Commission mulls following the U.S.’ lead and ending its funding to major global health initiatives such as Gavi and The Global Fund, and, in a draft document, proposes revising future overseas development aid to include sunset clauses for what it considers “overlapping” programs. [Euroactiv]
Australia is becoming increasingly isolated in its efforts to counter China’s influence in the Pacific, as Western partners cut aid and China positions itself as a more consistent development partner to island nations, according to a Lowy Institute report. [The Guardian]
More than 60 countries signed the first United Nations treaty on cybercrime on Saturday, but critics deem the declaration weak and say it could enable overreaching by governments. [South China Morning Post]
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