FFD4 Seville: Political, technical faultlines impeding debt reform laid bare, outcome offers modest hope

At the recently concluded Fourth International Conference on Financing for Development (FfD4) in Seville, Spain, sovereign debt emerged as one of the most urgent and widely discussed issues. Strong, often critical perspectives from heads of state, international institutions, civil society leaders and economists were central to the conversation. 

The data alone is staggering: 3.3 billion people now live in countries spending more on debt servicing than on health or education, as highlighted by Philemon Yang, president of the United Nations General Assembly.

Multiple speakers, from International Monetary Fund representatives to the UN Economic and Social Council President Bob Rae pointed to the need for reforming the global financial architecture, particularly as high interest rates, currency mismatches and diminishing fiscal space threaten the development trajectories of many low- and middle-income countries.

The reason debt has become so central to both development and climate discussions is that developing countries now face overlapping fiscal demands of servicing debt, while also investing in climate resilience, infrastructure and human development.

With rising interest rates and limited access to concessional finance, many low- and middle-income countries are forced to choose between repaying creditors and funding climate adaptation or public services. This makes debt not just a financial issue, but a development and climate justice issue, especially for nations that are least responsible for climate change yet most affected by it.

Statements at the opening plenary as well as the thematic roundtable on debt at FFD4 saw the sharpest critiques from Global South leaders. The President of Kenya called for a sovereign debt architecture that enables development rather than entrapment, while warning of the mischaracterisation of African risk by credit rating agencies (CRA).

This concern was echoed across side events and high-level panels at the conference: The 'African premium', or higher borrowing costs driven by perceived risks and likely biases, urgently needs rectification. To this end, the inclusion of the new African credit rating agency AfCRA’s operationalisation in the FFD4 outcome text was considered a welcome step by civil society.

Tanzania, Mozambique and Nepal (on behalf of Least Developed Countries) highlighted the need for fairer access to concessional finance, debt-for-climate and development swaps, and debt resolution frameworks that differentiate between liquidity and solvency problems. Angola’s President, João Lourenço, speaking on behalf of African states, emphasised the urgent need for debt relief and more sustainable debt treatment models, alongside reforms to international institutions to ensure Africa’s full inclusion in decision-making. 

The Prime Minister of the host country, Spain, advanced several concrete proposals under the Seville Platform for Action. These included debt payment suspension clauses for external shocks, such as pandemics or climate disasters, debt swaps linked to national development goals, and reforms to the G20 Common Framework to improve creditor coordination and equitable treatment. He also stressed that debt sustainability assessments must evolve to account for investments in resilience and productivity, not just traditional debt-to-GDP thresholds.

But the call for reform wasn’t limited to public actors. At a high-level side event on ‘Maximising the Potential of Development Finance: Perspectives from private creditors’, Standard Bank CEO Sim Tshabalala and former Standard Chartered Chair José Viñals critiqued the current financial rules that restrict capital flows to emerging markets. They argued for amending Basel III regulations that penalise infrastructure lending, the need for reclassifying infrastructure as a distinct asset class, and promoting blended finance and MDB guarantees to crowd in private capital.

This growing consensus about the limitations and bias of CRAs was further sharpened in a separate event hosted by the South Centre and IDEAS. CP Chandrashekar reminded the audience of the 2008 financial crisis, when CRAs were penalised for failing to update ratings despite internal warnings. He questioned whether institutions that profit from the issuers they rate should wield such power over sovereign borrowing.

Carlos Correa (representing South Centre) called for breaking the oligopoly of the “big three” CRAs, which collectively control 96 per cent of the global market, while Charles Abugre (representing IDEAS) cited the example of Moody’s downgrade of Afreximbank, despite its sound fundamentals, as a case study in systemic bias.

Yuefen Li warned that US regulations effectively entrench the dominance of these agencies by legally mandating their ratings for global market participation (creating barriers to entry and shielding them from accountability). In her words, “the monopoly of CRAs is worse than industrial monopolies: because their decisions impact entire economies, not just industries”.

Perhaps the most damning assessment came from economist Jayati Ghosh, who argued that CRAs don’t merely reflect creditworthiness, they actively shape it. During the pandemic, she noted, low-income countries were more fiscally disciplined than their high-income peers, yet were punished with spread increases of 7-11 percentage points, compared to near-zero changes for advanced economies. She criticised the international system for trapping countries in a cycle of debt-driven development, where they must orient policies to please capital markets rather than respond to citizen needs.

Ghosh, alongside others, called for the establishment of a global public credit rating agency as an institutional counterweight to private bias (the language for which, in the conference’s final outcome document was heavily watered down she noted as well). 

In this context, the Compromiso de Sevilla, the official outcome document of the conference, received mixed reviews for its sections pertaining to debt. Joel Odigie from International Trade Union Confederation-Africa welcomed language on local currency borrowing, state-contingent instruments and a global debt registry, but questioned the decision to house the latter under the World Bank. He also noted the absence of clear principles or enforcement mechanisms for responsible lending and borrowing.

Penelope Hawkins from UN Conference on Trade and Development called for stronger legal structures and a standing international committee to preserve the knowledge and technical capacity gained through debt restructuring processes.

Robert Plachta of Germany’s Finance Ministry offered a more optimistic view, pointing to new language on “comparability of treatment” as a modest step forward in engaging the private sector within the G20 Common Framework.

Developing countries had long called for a UN-led sovereign debt workout mechanism as part of the FFD4 outcome, but the final text watered down language on the intergovernmental process due to Global North resistance. Despite the setback, civil society and developing nations see the mention of a UN-space for discussions on debt workout as a potential entry point for advancing a fairer debt architecture in the decade to come.

Debt was not just a sub-theme at FfD4. It was a litmus test for whether the international community is willing to challenge entrenched power structures in global finance. The conference made visible the scale and systemic nature of the sovereign debt crisis, while also spotlighting the political and technical fault lines that have long hindered reform.

If there was one unifying message, it was this: Sovereign debt cannot be treated as a technical matter alone. It is political. It is structural. And unless it is governed more fairly and transparently, it will continue to undermine the very development goals the 'Financing for Development' agenda was built to support.