Finance experts launch report at Vatican on foreign debt relief

VATICAN CITY — The Holy Year 2025 can have a lasting impact on the world’s poorest countries if governments and international institutions embrace a key element of the biblical concept of jubilee by forgiving, restructuring or pausing foreign debt repayments, said a report commissioned by Pope Francis.

At the late pope’s request, the Pontifical Academy of Social Sciences and the Initiative for Policy Dialogue at Columbia University in New York brought together 30 global experts in debt, development and the global financial system to address the current debt crisis, prevent future crises and promote sustainable development.

The “Jubilee Commission,” which began meeting in February, released “A Blueprint for Tackling the Debt and Development Crises and Securing a Sustainable People-Centered Global Economy” June 20 at the Vatican.

“Today, 3.3 billion people live in countries that spend more on interest payments than on health, and 2.1 billion live in countries that spend more on interest payments than on education,” the report said. “Interest payments on public debt are therefore crowding out critical investments in health, education, infrastructure and climate resilience.”

The indebted governments — “fearful of the political and economic costs of initiating debt restructurings — prioritize timely debt payments over essential development spending,” the report said. “This is not a path to sustainable development. Rather, it is a roadblock to development and leads to increasing inequality and discontent.”

Eric LeCompte, executive director of Jubilee USA Network, an interfaith group promoting debt relief and development, was not a member of the commission, but supported its work and was at the Vatican for the launch of the report.

Changing the way loans to developing nations are made, structured and restructured when a crisis occurs is essential because economic crises “are the main causes for war, for human rights violations, for migrations, for many of the environmental challenges that we are having,” he told Catholic News Service June 19.

Many people will say, “A debt that is owed is a debt that should be paid,” LeCompte said, “but I think it’s more complicated than that.”

Especially since the pontificate of St. John Paul II and his push for foreign debt relief, he said, the Catholic Church’s position has been that “a lot of lending has been used not to help people, but to hurt people,” and “historically, lending that has been promised to build bridges has built palaces. Lending that has been promised to build roads has been turned into military dictatorship funding.”

The Jubilee Commission report said, “Debt contracts are voluntary arrangements between creditors and debtors, and as such, they are equally responsible when matters go badly and there are problems in repayment.”

“Indeed,” it continued, “in some ways, creditors, who typically have more expertise in risk assessment and management, might even have greater responsibility” than the debtor nation.

The experts on the commission said, “Development inherently involves risk — whether from long-term investments, exposure to commodity price fluctuations, or vulnerability to external shocks — and that sustainable development requires these risks to be distributed globally in an efficient and equitable manner.”

“The burden should be borne by those most capable of absorbing it, which is not what the current system delivers,” the report said.

And, the experts said, there must be a fair way of responding to situations where a debtor nation simply cannot afford to service its debt while feeding its people.

“At the heart of the problem lies a hole in the international economic architecture: the absence of a sovereign debt crisis resolution mechanism,” the report said. “While mechanisms exist for corporate bankruptcy within countries, there is no equivalent framework for sovereign debtors.”

Without such a process in place, the experts said, “in each crisis, debt restructurings must be negotiated. These negotiations are governed not by fairness or efficiency, but by power, with the result that the outcomes are typically neither fair nor efficient.”

Exacerbating the problem, they said, “prevailing legal systems — notably those of England and the United States, the major jurisdictions for the issuance of government international bonds — permit specialized financial speculators, known as vulture funds, to purchase defaulted debt on secondary markets and sue for full repayment.”

“This financial play turns a society’s suffering into a source of profit,” the report said. “Under current rules, a handful of speculators can effectively hold tens of millions of people hostage.”

The experts urged support for the creation of a “Jubilee Fund,” proposed by Spain, that would help countries buy back their debt at reduced rates rather than having the debt be sold at a discount to the vulture funds.