A debt jubilee is the only way low-income nations will escape the penury of debt distress (and the IMF/World Bank)

There is something deeply wrong with the world under Capitalism when the poorest countries in the world pay more out on debt servicing to loans that the wealthy countries have provided than they do on maintaining their health care services. I have been examining data derived from the World Bank WDI database and the IMF WEO database pertaining to the debt sustainability of the poorest nations in the world. Using 2019 data (most recent) 64 nations, for which coherent data is available, spend more on external debt services than they do on health care (Source). At the same time, the most recent assessment from the IMF and the World Bank, under their Debt Sustainability Program (DSA) shows that debt distress is rising fast across the low-income bloc of countries. The response of the multilateral institutions is to enter ‘agreements’ with these nations that impose fiscal austerity and enforce a range of changes such as privatisation, outsourcing and more. This strategy does not work and only serves to protect the assets of the rich countries and corporations. A debt jubilee is the only way low-income nations will escape the penury of debt distress and the austerity-obsessed clutches of the IMF and the World Bank.

In terms of the 70 nations that are included as eligible under the IMF/World Bank Poverty Reduction and Growth Trust (PRGT), 13 per cent are in debt distress and a further 39.1 per cent are at high risk of distress, according to the most recent assessment published on February 28, 2023 – List of LIC DSAs for PRGT-Eligible Countries.

The following Table summarises the most recent data.

Risk of debt distress Number Proportion (%)
In debt distress 9 13.0
High 27 39.1
Moderate 26 37.7
Low 7 10.1

In terms of the African nations, 35 per cent are at high risk of debt distress and 19 per cent are already in debt distress and being forced to cut social and health programs.

If all low-income countries are examined the proportion of those already in debt distress rises to around 15 per cent and those at high risk rises to 45 per cent.

On April 23, 2023, the – Global Sovereign Debt Roundtable – which began operation in February 2023 and comprises the IMF, World Bank, India (as G20 Presidency), in addition to “official bilateral creditors … private creditors and borrowing countries”, met to discuss the appalling global situation with respect to poor nation indebtedness.

They issued a – Global Sovereign Debt Roundtable Co-Chairs Press Statement – which contained its share of ‘motherhood’ statements and resistance to any widespread debt restructuring or debt jubilees.

The US, in particular, was highly resistant to the inclusion of debt originating from the multilateral development banks in any restructuring arrangements.

But it did note that the – International Development Association (IDA) – which is part of the World Bank and “aims to reduce poverty by providing zero to low-interest loans (called “credits”) and grants for programs that boost economic growth, reduce inequalities, and improve people’s living conditions” – would provide:

… positive net flows and the ex-ante implicit debt relief through increased concessionality and grants to countries facing higher risks of debt distress was welcomed.

With the onset of the Covid-19 pandemic, the debt to GDP ratios are rising fast among low-income nations and the number of nations in debt distress is rising.

The problem is that servicing the debt is now overtaking the outlays that the nations can make on human progress within their nations, with health care being an obvious casualty of the debt explosion.

Chapter 3, in the most recent IMF – World Economic Outlook (April, 2023) – is entitled “Coming down to Earth: How to Tackle Soaring Public Debt” – and continues the IMF’s obsession with so-called “fiscal consolidation”.

They claim that if low-income, highly indebted nations engage in fiscal austerity, “accompanied by growth-enhancing structural reforms and strong institutional frameworks” then they will be able to reduce their debt exposure.

It hasn’t worked very well to date.

They admit that as “fiscal consolidation tends to slow GDP growth, consolidations on average have negligible effects on debt ratios” but still hold the line that austerity, privatisation, implementation of user-pays etc are the way to go for countries in debt distress with some debt restructuring thrown into the mix.

Further on in the chapter they come clean and note that:

The empirical literature on the effects of restructuring on debt ratios is relatively limited, and the overall effects of debt restructuring and its interaction with fiscal policies have rarely been explored.

Which means the calls for a fiscal consolidation strategy, which is just the IMFs buzz term for harsh cutbacks in public expenditure that are usually targetted at education and health care, is based on ideology rather than hard evidence.

There is a huge body of evidence that the IMF strategies do not improve outcomes significantly and result in a transfer of wealth to wealthy individuals within the nations and the wealthy nations that suck out resources from the poorer nations.

The IMF has refused to reduce the total value of its debt for the low income nations but prefers to extend the terms of the arrangements when a nation becomes distressed and impose increased conditionality.

Even the World Bank has expressed concern over the way the IMF is responding to the debt crisis now besieging the poorer nations.

The flash point came with the IMF’s deal with Chad in early 2023.

In its January 2023 – IMF Country Report No. 23/7 – we learn that Chad was the “first country to reach a debt treatment agreement with official and private creditors under the G20 Common Framework.”

While Chad has oil revenues its remains in abject poverty.

The World Bank indicates the following (Source):

1. “between 2003 and 2011, the number of poor increased from 4.7 million in 2011 to approximately 6.5 million in 2019. In 2018, 42% of the population was living below the national poverty line.”

2. “a child born today will be 70% less productive in adulthood than a child who received a quality education and benefited from appropriate health services.”

3. “Moreover, 20% of Chadian children will not make it to their fifth birthday, and 40% of children suffer from stunting, which can have long-term implications for their cognitive development. Between the ages of 4 and 18, on average, children in Chad spend no more than five years in school.”

4. “Chad has one of the highest maternal mortality rates.”

5. “With more than 450,000 refugees from Sudan, the Central African Republic, and Nigeria, Chad continues to deal with the consequences of tensions in neighboring countries.”

In other words a disaster.

The IMF deal maintained the nation’s debt exposure to private creditors but extended the terms for repayment.

They also required the nation to maintain tight wage controls (except for the ‘military’), cut back “fuel and electricity subsidies”, and financial market deregulation (to allow banks to make more money).

Fiscal rules were imposed to limit net public spending.

The agreement also required the nation’s oil revenue to be “used to build buffers and accelerate the payment of debt” rather than improving the circumstances of the people.

After earlier suggesting that the IMF deal with Chad would not increase their ability to recover and that debt reduction strategies were necessary, the World Bank boss noted on April 26, 2023 in – Remarks by World Bank Group President David Malpass at the Breaking the Impasse on Global Debt Restructurings Conference – that the massive debt carried by the low-income countries was “one of the biggest obstacles to development” and with “60 per cent of low-income countries either in debt distress or at high risk of it”, we can conclude that:

… the global instruments to tackle debt sustainability and debt restructuring have been ineffective. Debt sustainability assessments have often proven to be overoptimistic — especially in terms of projections of the key variables such as growth, inflation, interest rates, tax revenues and government spending restraint. Not enough attention has been given to the rising danger of domestic debt and its consequences for growth.

He noted that in dealing with the debt crisis facing the low-income nations, the world institutions had to:

… avoid the Chad outcome ..

So what can be done?

The narrative that the likes of the IMF presents indicate that the blame for the debt crisis and poverty lies within the nations themselves.

They overspend on waste, they are riven with corruption and all that sort of stuff and to some extent there is some evidence base.

But those issues are small compared to the role that the first-world creditors and the official multilateral institutions play in enslaving the nations in debt.

We know that global corporations bleed the poorest nations dry through tax crime and other corrupt practices.

In its 2020 report – Economic Development in Africa Report 2020: Tackling Illicit Financial Flows for Sustainable Development in Africa – UNCTAD noted that:

At dinner parties in capital cities around the world, the world’s cosmopolitan elite compare notes on the best schools, the least-polluted cities,
the alarming spread of insecurity, the threat of populism, and the latest on tax havens. In a parallel reality, when educated men and women from the world’s disillusioned middle class meet, from the suburbs of industrialized countries to the compounds of African cities, they share common concerns about the future of their children, deep misgivings about inequality, injustice and a growing resentment towards the prosperous elite. The rhetoric is often the same: complaints about how the wealthiest individuals and the largest corporations are able to avoid paying taxes, how the poor cannot pay, and
how those in the middle are increasingly squeezed. In mineral-resource-rich developing countries, including in Africa, these conversations sometimes allude to the latest press reports on unfair contract deals in the mining sector and the prevalence of IFFs, a term that has made global media headlines for the past 10 years.

IFF – illicit financial flows from poor to rich – are massive and undermine the development process.

UNCTAD estimated (in 2020) that around $US88.6 billion leaves the poor nations in illicit capital flight, partly through “trade misinvoicing” (that is, criminal accounting practices).

There are many other ways that the rich and the rich countries plunder the poor nations.

Constructing the problem in that way opens the discussion to different solutions including widespread debt jubilees, which I support.

Nations will never grow in a sustainable way when they are continually forced into ‘fiscal consolidation’ mode and are forced to sell off public assets to private equity interests.

The only way forward is for currency-issuing nations to use that capacity to wipe the debt off their books.

Ultimately, the world needs a new multilateral structure and I have long advocated the abandonment of the IMF and the World Bank and the creation of a progressive new institution designed to reduce poverty not be a conduit in the transfer of real resources (and wealth) from the poor to rich nations and poor to rich people.

Many low-income countries can only access limited quantities of real resources relative to their population and are highly dependent on imports of food and other life-sustaining goods – where the well-being of their citizens cannot be solved within those nations’ own borders, especially if their export potential is limited, regardless of the measures that the country may employ to protect itself from speculative capital flows and to reduce its dependence on imports.

These countries may find no market for their currencies and may be forced to trade in foreign currencies.

A new multilateral institution should be created to replace both the World Bank and the IMF, which is charged with the responsibility of ensuring that these highly disadvantaged nations can access essential real resources such as food and not be priced out of international markets due to exchange rate fluctuations that arise from trade deficits.

In – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World (Pluto Books, September 2017) – we argued that instead of forcing these nations to run austerity campaigns just to keep their exchange rate higher and repay the massive debt burdens, new international agreements are needed to outlaw speculation by investment banks on food and other essential commodities.

More generally, a new framework is needed at the international level to ban illegal speculative financial flows that have no necessary relationship with improving the operation of the real economy.

Finally, this new multilateral institution would not force nations to cut taxes for high-income earners in return for aid, which is another bias in current IMF and World Bank interventions.

It would recognise that the role of taxation is to create non- inflationary space for the sovereign government to command real resources in order to fulfil its socio-economic programme.

The reality is that there are many idle resources in the poorer nations – land, people and materials – that can be bought by government and mobilised to reduce poverty without causing inflation.

Finally, it should be acknowledged that these nations will likely have to run continuous fiscal and current account deficits for many years to allow the non-government sector to accumulate financial assets and provide a better risk management framework.

A progressive international agency would help them to do just that.


We thus need debt relief immediately in the form of total forgiveness.

And the rich countries should see their fiscal responsibilities as extending beyond creating full employment and benefits in their own nations.

That is enough for today!

(c) Copyright 2023 William Mitchell. All Rights Reserved.

This Post Has 21 Comments

  1. This reminded me of an interview with Glenda Sluga of the Toynbee Foundation on September 20, 2022 on Inclusion and Exclusion in International Ordering

    “… I hope that that is the most important lesson of my monograph. The efforts that people have made to utilize this space of the politics between states in a way that might produce a better world is crucial. I think that this is a project that we have abandoned in the 21st century. And really, in the midst of this war, one of the hardest but also urgent things to do is to imagine a post-war peace—that is a better international order than the one that led to this.”

    For over 2000 years, the words of false preachers, and their adopted customs, have become entangled in bible believers minds; completely neglecting what is actually written. So it is fair to say that these false preachers will continue to exist because their “… heart studieth destruction, and their lips talk of mischief.’ Proverbs 24:2. Economics is simply anatomy, an understanding of the structures and interactions of our living system in which its precise effects can never be accounted for without evaluating through trial and error, ‘For who hath known the mind of the Lord, that he may instruct him?’ 1 Corinthians 2:16

    We don’t expect anatomy to have all the answers, but through the continual updating of our anatomical knowledge we can (ideally) improve the effects of/on our living system. What body type you believe is ideal, the quality/quantity of air/water is sufficient etc., is, of course, subjective – to a point, however, the efficiency of achieving those ideals is dependent upon understanding an accurate depiction of our living system.

    MMT is an up to date depiction of the interactions of our living system >bringing to centrerevolutionary< this understanding is for our cognition; it shifts our imaginative capabilities towards better utilising our living system, as opposed to trying to control our living system. It redirect us to embrace the natural worlds restrictions, not fear man's created ones, for '… Thou madest him to have dominion over the works of thy hands; thou hast put all things under his feet..' Psalm 8:6.

    What is great about this blog, or more accurately this treasure trove of gems, is that it is actually beyond the -isms, -ists, and -cys of our world, and teases us with a taste of a healthy living system; no need for marketing efficiency because it just is. I sincerely hope all your published works and your '… teaching fall like rain and..", "…words descend like dew, like showers on new grass, like abundant rain on tender plants.' Deuteronomy 32:2

    MMT now helps economics, the world, to move on and recognise that 'To blaspheme the earth is now the dreadfulest sin..' Zarathustra's Prologue, Friedrich Nietzsche, Thus Spoke Zarathustra

  2. Bill wrote “It would recognise that the role of taxation is to create non- inflationary space for the sovereign government to command real resources in order to fulfil its socio-economic programme.”

    It’s good to see this in writing because Richard Murphy is about to rewrite the whole basis of MMT the way he sees things. In his version Warren Mosler and Bill Mitchell have got it all wrong. I have been banned from commenting on his site but someone who regularly comments here is still permitted but I don’t know how long that will last because Murphy turfs people off once they disagree with him and he does so in an incredibly rude manner. The MMT war is about to begin. It will be Murphy plus Kelton versus Mitchell, Mosler and Wray.

  3. Dear Rod White (at 2023/05/01 at 3:57 pm)

    You wrote:

    The MMT war is about to begin. It will be Murphy plus Kelton versus Mitchell, Mosler and Wray.

    There will be no war. The first two names in this list were not there at the beginning and trying to build celebrity by copying others ideas is not particularly edifying.

    The original developers define what MMT is, not those who came later.

    I just wouldn’t give them any oxygen in their quest for self importance.

    best wishes

  4. Debt Jubilee is the only the only real answer to third world poverty, but it won’t happen in my lifetime.
    Michael Hudson is the best chronicler of debt jubilees and adds the realpolitik comments of the modern dilemma.
    All these debts are in U$ and the truth is that the IMF & World bank are just the accountants. To collect the debts they send in their ‘Heavies’ from the CIA or 800 military bases to break legs.
    There are no Vandals who can sweep through North America and affect the fall of Rome.
    The present financial capitalists, oligarchs, money lenders would rather see the world in flames than give up on their protection money.

  5. Everything you describe in this post is accurate, but it’s missing one reason why the proposed solution never gets implemented: the debts are how the system is designed to keep the poor nations in their neo-colonial place as outlined in Michael Hudson’s “Super Imperialism.”

    Both the Western nations that benefit and the comprador elites in the countries exploited have every incentive to keep the system in place just as it is.

  6. Murphy AND Kelton on one side, you say? Don’t like the sound of that…

    Murphy says “taxes are to contol inflation”, as opposed to creating fiscal space for government social spending.

    Maybe price controls, rationing, and subsidization of low income households are required, in a mandated full-employment, low interest environment…oops….a command economy…

  7. Neither debt jubilee nor redirection of money from natural resource sales back to producing countries will benefit inhabitants of developing nations.

    Instead, to the extent that debt jubilee or redirection of funds further “economic development,” such measures will but speed the ecocide. (See Thursday’s Washington Post for an article on the devastation wrought in Guinea by bauxite mining for lightweight aluminum for EV’s (Chason and Sharrock).)

    All current economics, MMT and neoliberalism included, are the product of the “carbon pulse.” All current economics is based on beliefs about growth that were fostered—that were made possible—by the availability of cheap energy.

    Now that horrifying results of energy consumption are clear, we need a new economics. We need an economics based on shrinking the human footprint. We have no such economics yet. That new economics will be the real “new lens.”

    (Michael Higgins, the President of Ireland, describes the issue perfectly in his address to TASC last Friday. The text of his address is available on his website.)

  8. Having poor nations is a political choice by the world’s current rulers, the USA. The USA has 800 military bases around the world, they have the power of veto over the IMF and world bank and control the swift international payment system plus the US dollar is the world’s reserve currency. It is about unipolar hegemony (keeping the status quo). Africa for example is about resource extraction for the benefit of US multinationals
    If someone asked Antony Blinken (current United States Secretary of State) why does the US not help developing nations?, he would respond that they are helping with the standard Washington consensus or Neo-liberal answer that the only way for a developing nation to be able to become wealthy is by becoming a net exporter, so money is coming in from overseas (TINA), when in reality the developing nations need food sovereignty, healthcare, infrastructure and education.

    So the question is: how do we change this situation so we have a civilized world and every nation given 25 to 40 years can be similar to say Australia or New Zealand?

    Another Marshall type plan similar to what happened after WW2 with the rebuilding of bombed-out Europe.

    Due to the radical right-wing Neo-liberal economic ideology (fake knowledge death cult) prevalent for the last 40 odd years, the average person is trapped in the false scarcity narrative thinking that the problem with developing nations is too many people and not enough to go around.

    So the way to have a civilized world is for the average person to find out how money and the financial system really works (know MMT) then the wool can not be pulled over peoples eyes with Neo-liberal economic BS.

    Obviously a civilized world benefits everyone, less refugees fleeing their home nations for financial and political reasons, is one example.

  9. Richard Murphy is a real Johnnie-come-lately. Not two years ago he was ‘in conflict’ with MMT and when the penny finally dropped for him, you could find him at Twitter still making faulty posts with entry-level errors.

    Kelton though? When did she end up on some other team? And wasn’t she a long-time contributor alongside Randy Wray?

  10. John B.,

    that’s a perfectly good way to say nothing can be done and it is dangerous to try, soon to be applied to climate. Bill has rewritten on degrowth, there’s no need to waste time assuming he believes current production is infinite.


    Looking at the numbers someone dug up earlier this year (Tooze?), the Marshall Plan wasn’t even that big, especially not considering the conditionality of relying on American production. The west is incapable of “finding the funding” even during what it calls war time, what hope is there?
    Ironically, the only alternative put forth is the chinese-led BRICS trade agreements, if they are actually serious. Or Varoufakis’ Progressive International, but that’s ridiculously optimistic, bless their hearts.

  11. @Neil Halliday
    “Murphy says “taxes are to control inflation”, as opposed to creating fiscal space for government social spending. ”

    Well they do also perform that function. The ‘creation of fiscal space’ amounts to the same: removal of spent currency for the same purpose.

  12. I saw Michael Hudson name-checked further up, but I don’t know how credible he is (though I see he hails from the same academic sphere as Randy Wray!). He was lately to be found at Ralph Nader’s podcast (which is known for faulty economics guests) spinning the line that the Federal Reserve is a totally private bank holding the government to ransom and controlling the money supply and from which the government ‘borrows’ money. He also has an orthodox notion of ‘debt’.
    His supporters in the comments promote that ‘American Monetary Institute’, promoted by US. Rep. Dennis Kucinich, whom Bill wrote about here some time back. These people have some funny ideas.

  13. Ferdy, I cannot speak to all of Hudson’s podcast appearances, but I have read many of his books and have found much of value there. He is not an MMT scholar, but he’s good on economic history and the global implications of the postwar US dollar institutions like the IMF and the World Bank.

  14. The debt trap is another word for exploitation.
    If 64 nations work to pay interest to the IMF and the World Bank, those populations are working for the US, its banks and its corporations.
    Corporations that are getting incorporated by hedge funds, that are getting larger and larger everyday.
    Hedge funds that are desperate to make more money, to pay interest to investors, that are expecting compounded returns on investments (just like an ordinary bank deposit).
    Nobody is producing anything.
    It’s like a gigantic ponzi scheme: for it to work, you need to get new subscrivers everyday and in exponential numbers.
    But, where are they coming from?
    In fact, the trouble with the west in not capitalism, but finantial capitalism.
    Finantial capitalism destroyed industrial capitalism in the west.
    But, industrial capitalism did not die; it just moved to the east.
    Just watch what’s been happening in Ukraine: the west wants to help Ukraine and sell them amunition for the riffles and cannons, but there’s no sufficient capacity to manufacture them.
    The EU is talking about buying amunition, but buy to whom? The Russians?
    Even the diesel Ukraine needs for trucks, cars and tanks, is said to having been sold by Russia.
    So, where does all this is leading the world to?
    Colapse is the word that comes to mind.
    And there are already many signs of colapse (just watch how politicians behave like kids in recess).
    We could be heading for a global flip, where the third becomes the first world and the first becomes the third – or even worst.
    Maybe, just maybe, the Chinese could avoid global colapse, but at what price?

  15. Ferdy
    I am an avid reader of Bill’s blog and like many others follow Hudson as well.
    Hudson understands MMT perfectly it is just that his work is the dissection of neo-liberalism, financial capitalism, US hegemony and about political reality in a dysfunctional world.
    Hudson lives in China and has indicated that he foresees a multipolar world where currency exchanges are related to a basket of minerals and food. A more Socialist system that would require an update to MMT. A job he leaves to others such as Bill and Steve Keen.

    Paulo – or even worst.
    I live 300 metres from MBDA so I wouldn’t even see the flash let alone hear the bang.

  16. Ferdy,

    language is a complicated thing, but “creating fiscal space” has a clear meaning, that there’s a simple formula to get the fiscal space from a blanket tax increase.
    As to Hudson, there’s the economic model, and then there’s the politics, internal and geopolitical, especially how you access and pay for power and other necessities in the global market, or what the definition of responsible politician is and how it was drilled into our heads, especially within Europe. I saw one recent article and was amazed at how european leaders were aware of the post-war trap despite none of the current ones being aware of any of it. Even if an exaggerated tale, we’re screwed.

  17. Even by her own admission Kelton originally had no issues with the orthodoxy until she became aware of MMT – which was a massive red flag for me.
    Anyone worth their salt knows the ruling ideology is wrong the first day they take an undergrad economics course. It should never take an introduction to MMT or any other school of thought to realise.

  18. Although I like the concept of debt jubilee as it has been discussed/written by MMT advocates and in history from what I read in Hudson’s books.

    However, I don’t think that it will solve the problem at all at the international level.


    First, how those nations came to become indebted are varied and complex.

    But if I were to sum it all up, It is about weak organization of those societies in terms of social, economic, and political aspects.

    By this lens alone, it doesn’t matter if we can write off all the debt they owed, or provide the money they need, they will be back to the same place where we begin, as the solution is just a relieve and not a cure.

    I feel that unless we offer some kind of assistance to help them tackle the root causes that took them there in the first place, the problem will always come back.

    Maybe, that is how the debt jubilee should be used while the debt is still there until all the assistance projects have been completed.

    Now, an issue that might become a concern, is this a kind of governance one should do it oneself and not be meddled by other nations. if not careful, this could be a kind of territorial and national conquer easily.

    So, what to do? I am not really sure. But this brings us back to exactly where we are today.

  19. A new multilateral institution should be created to replace both the World Bank and the IMF.

    If you can get it to do all those things you say, great!

    How do we prevent the current world hegemony from taking it over, though, as they did with the World Bank and IMF? Otherwise, it will be much of the same ol’ same ol’

  20. Darren,

    by having most of the world, never mind most of the world’s resource owners and population, being wise to the con, and withholding the treats if they/we misbehave again.

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