FFD4 Seville: Debt cancellation is the first step to global economic justice

The 4th International Conference on Financing for Development (FfD4) in Seville, Spain, organised by the United Nations, was convened for revitalising financing for sustainable development across the globe. 

But the meeting took place in the face of severe headwinds. The United States was absent, having made its intentions clear by severely cutting aid commitments and several major economies, including the United Kingdom, France and Germany, also announced aid reductions. 

Clear indications are that the Seville Conference will instead rely on mobilising private investment, blended finance and public-private partnerships, which have not historically yielded great results.

Non profit ActionAid’s Secretary General, Arthur Larok, speaking from Seville, said, “It is sad to realise that despite the call by the UN Secretary-General for solutions to the unsustainable, unfair and unaffordable global debt system, a few Global North countries effectively shut that door by blocking a UN Framework Convention on Debt in the final text. This resolution, championed by African countries and civil society, would have initiated the process of ending the debt crisis and the re-establishment of a transformative global financial system.

Larok said that International Monetary Fund’s (IMF) denial of the ongoing systemic debt crisis, although disappointing, is not surprising. “Many Global South countries are in a debt crisis by the IMF’s own terms, with most spending more on debt servicing than on health and education. But the IMF seems to only consider it a crisis when creditors don’t get paid — for them, it is not a crisis if people in the Global South die,” he stated.

The hypocrisy of those advocating private finance for development while rejecting debt cancellation for Global South countries was most vividly seen during the 2008 global financial crisis. In advanced economies, large private banks deemed “too big to fail” were rescued with massive bailouts, often effectively writing off or socialising their bad debts. 

Central banks slashed interest rates and injected liquidity, while governments absorbed toxic assets and guaranteed bank liabilities—an implicit or explicit cancellation of debts to stabilise the financial system. And affordability was never questioned. The 2008 bailout for banks was 50-60 times the total debt of sub-Saharan Africa.

This asymmetry exposes power imbalances in global finance: Debts held by powerful institutions are negotiable or dispensable, while debts owed by poorer countries remain rigid obligations, enforced even at the cost of human development and economic sovereignty.

In this context, we must remember how Iceland allowed its three largest banks — Glitnir, Landsbanki and Kaupthing — to collapse in 2008, refusing to fully socialise their massive foreign debts, protecting domestic deposits while allowing foreign creditors to take the losses. Crucially, rather than sparing top banking executives and financiers, it pursued legal action: Over two dozen bankers were prosecuted and convicted for crimes linked to the crisis.

A few Global South countries have also tried to chart alternative paths. Under President Rafael Correa, Ecuador audited its public debt and declared a portion of it illegitimate and odious, arguing it was contracted under corrupt or undemocratic regimes. Ecuador defaulted on $3.2 billion in bonds, then bought them back at roughly 35 cents on the dollar. This saved hundreds of millions in debt servicing, allowing greater social spending.

After its catastrophic 2001 default on $100 billion of debt, Argentina refused IMF demands for deep austerity and instead pursued partial default and aggressive restructuring. It negotiated major haircuts (around 70 per cent) with creditors, ultimately returning to growth despite being cut off from international credit markets for years. 

While not driven solely by debtor governments, the Jubilee 2000 campaign helped secure large-scale multilateral debt relief. Countries like Uganda and Mozambique saw significant debt cancelled, freeing up resources for health and education. However, this relied on donor conditions and was partial.

After the debt crisis of 1990-91, India followed a model of resilience—eschewing extreme measures, managing debt conservatively and relying on fiscal prudence, strong reserves and domestic financing to avoid crises. While not challenging the fairness of debt, India achieved macroeconomic stability through financial management, not confrontation.

The crisis did, however, mark a turning point, launching a transition from a closed, state-controlled economy to a more market-oriented one. The post-liberalisation era has seen a burgeoning middle class, but also increased inequality and informality for the majority of the population.

So despite variations across countries, the message is clear: There is a need to ensure that principles of justice dominate the way resources are mobilised for sustainable and equitable development globally. While the UN has framed the Seville Conference as a “once-in-a-decade” opportunity to transform how development is financed, ensure no country is left behind and prevent the UN-mandated Sustainable Development Goals from floundering due to funding shortfalls, it appears to be another “missed opportunity”.

Even by the standards of missed opportunities, the Seville Conference did a profound disservice by failing to address the growing momentum for a Loss and Damage Fund promoting climate justice, as established in November 2022 at 27th Conference of Parties to the United Nations Framework Convention on Climate Change.

This was the moment to express concern about the substantial headwinds the fund faces — including disputes over governance, slow disbursements, inadequate pledges and the U.S. withdrawal. Furthermore, the African Union’s declaration of 2025 as the “Year of Justice for Africans and People of African Descent Through Reparations” should have brought the idea of reparative justice to the table, addressing colonialism, the transatlantic slave trade and apartheid. But that too did not happen.

Sandeep Chachra, executive director, ActionAid Association, speaking on the sidelines of the Seville Conference, said, “While debt cancellation may be a good starting point, it has often served to divert attention away from the question of reparations for colonial pasts and climate change. Rather than debt cancellation, which is a relatively smaller issue, reparations may provide a deeper and just cure to the ongoing inequalities of international trade, continuing forms of neo-colonial extractivism and democratise power. That the Seville Conference sidestepped this more foundational call is unfortunate — especially when across our planet, people’s movements are calling out for reparations as a key step in advancing decolonisation.”

Hope lies only with justice-loving people around the world and the enlightened governments of the Global South, when they come together and push for cancellation of debt, compensation for loss and damage from climate change and reparations for the continuing impacts of colonial and neo-colonial regimes. Seen in this context, we must recognise that, important as it is, debt cancellation is only the first step towards global economic justice.

 Joseph Mathai is head of communications at ActionAid Association. 

Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth and ActionAid Association.