As we enter 2025, 54 countries are in debt crisis, forced to cut their spending on basic public services and climate action in order to pay external debts. Last year, lower income countries between them paid US$ 138 billion just to service their debts, sacrificing health, education, people’s rights and sustainable national development to satisfy their wealthy creditors. This has a devastating impact on the majority of people, impacting women, young people and those on low incomes most acutely.
But the time has come to ask who really owes who? It is time to broaden our understanding of debt overall. There is growing consensus that there are a series of historic, practical or moral debts that rich countries owe – whether related to climate change, colonialism, slavery, illicit financial flows or failures to meet established aid commitments agreed at the United Nations. When you quantify these and compare them with the contractual debts that lower income countries are forced to pay, the results are startling.
Based on the most systematic studies, the climate debt that rich polluting countries are liable to pay low- and lower-middle income countries is US$ 107 trillion. This is more than 70 times greater than the total external debt of US$ 1.45 trillion that these countries collectively owe.
It is the shocking imbalance of global power that enables the external debts of lower income countries to be brutally enforced whilst the climate debts of rich countries go largely unpaid and unenforced. The connections between the climate crisis and debt crises amount to a vicious cycle, which must be ended in 2025.
Other historic debts of rich countries have not been so systematically codified or quantified. But there is no reasonable doubt that reparations are owed to the Caribbean, Africa and the African diaspora for colonisation and the transatlantic slave trade. But the colonial plunder of resources is not only a historical matter. It is a very real and ongoing part of the present unjust global economic structure, driven by institutions like the IMF that have hardly changed their voting structures since the colonial era. This facilitates multinational corporations shifting on average US$ 1.13 trillion worth of profit into tax havens causing governments around the world to lose urgently needed tax revenue.
The impact of both historic and ongoing colonial structures goes hand in hand with patriarchy, narrowly delineating and enforcing gendered roles. When public services are chronically underfunded, women and girls are the first to lose access and face rights violations, the first to lose opportunities for decent work in frontline provision and the first to absorb the rising tide of unpaid care work that invisibly props up economies. These forces amount to structural violence against women and create an environment where exploitation and physical violence becomes normalised. The climate crisis exacerbates this, with impacts being felt most acutely by women and girls. In the big picture, there is a clear debt to women for the decades, indeed centuries, of carrying the disproportionate share of unpaid care and domestic work that goes unrecognised and undervalued.
With the Pope declaring 2025 as a Jubilee Year, a year in which external debts should be forgiven, debt will once again be high on the global agenda, as it was back in 2000. The Jubilee campaigns in the early 2000s, which started with faith-based organisations and rapidly spread to wider justice movements, were considered a great success, winning significant debt relief in 2005. But 20 years later the global debt crisis is more severe than it was before, and it is clear that this time there is a need for a fundamental overhaul of the global financial architecture, shifting the power over debt away from the IMF to a more representative and inclusive UN body through agreeing a UN Framework Convention on Sovereign Debt. In the middle of 2025, the 4th UN Financing for Development Conference offers a real opportunity for economic system change.
If we are to succeed in building the momentum to dramatically transform the international financial architecture, we need to consistently ask, who is benefiting from and upholding the present failing system, and ultimately, who owes who? ActionAid’s latest briefing lays out new data and analysis that can inspire collective action in 2025 by civil society movements and governments.