A Jubilee 2025 call for a fair debt architecture: Bridging ethics and policy
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Article summary
Moderator
- Vera Songwe, non-resident senior fellow in the Africa Growth Initiative at the Brookings Institution
Panellists
- Martin Guzman, Former Minister of Economy of Argentina
- Monsignor Juan Antonio Cruz Serrano, Permanent Representative of the Holy See to the Organization of American States
- Amir Manghali, Regional Programs Coordinator for East Africa, Islamic Relief Worldwide
- Mark Flanagan, Deputy Director SPR, IMF
- Manuela Francisco, Global Director for Economic Policy, Prosperity Vice-Presidency, World Bank
- Reverand Dr Kenneth Mtata, Programme Director for Life, Justice and Peace Unit, World Council of Churches
- Reverand Jackline Makena Mutuma, Pastor, Methodist Church in Kenya
A recording from this session can be found online on the IMF’s website.
Vera: Today’s discussion focuses on fair debt architecture and a new global financial system – topics we’ve debated for a long time. It’s particularly timely given changes in aid flows: traditional multilateral development aid is decreasing, while developing countries are contributing net positive flows back to the IMF. Yet, globally, resources continue to leave regions like Africa toward the private sector, limiting investment where it’s most needed.
The Jubilee Report, co-chaired by Martin Guzman and Professor Stiglitz, addressed both technical challenges and practical solutions for restructuring the financial system. Its recommendations are now influencing global conversations, including recent interventions by the Pope. The report diagnoses issues that the World Bank, IMF, and broader Bretton Woods institutions must address. It’s time to review and restructure these systems. Martin, as co-chair of the Jubilee Report, could you start us off by summarizing the key recommendations, particularly regarding the IMF and its role in addressing the debt crisis and future crises?
Martin: This is not just a financial problem – more than 3 billion people live in countries that spend more on debt than on education or health. Despite net positive flows from international financial institutions, money is often used to repay debt rather than support recovery, effectively creating bailouts that prioritise creditors over people.
The Jubilee Report recommends debt operations tailored to each country. Some countries need maturity extensions and interest reductions, while others require deeper restructurings with principal haircuts to avoid destabilising fiscal consolidation. The report emphasises shared responsibility: both creditors and debtors must act, and IFI financing must not be used for bailouts. The IMF can play a decisive role by lending into arrears, conducting debt sustainability analyses that identify relief needs, and supporting guarantees from MDBs or other sources to reduce interest rates and default risk. Recent developments, such as the U.S. Treasury swap with Argentina using SDRs, show that solutions are possible with political will. Finally, the report calls for even-handed treatment of countries under similar circumstances. Political interference, as seen in cases like Argentina, undermines multilateralism and carries a deep reputational cost. Implementing these proposals can improve both short-term and medium-term outcomes.
Monsignor Juan Antonio Cruz Serrano: The word Jubilee means joy – the joy we seek in life. But often, we are not truly living in joy. The concept of Jubilee, rooted in the Bible (Leviticus 25), calls for freedom for prisoners, restoration of land to its owners, and cancellation of debt – a renewal of creation. Everything we have ultimately belongs to the Lord, and Jubilee restores life, land, and freedom to their rightful place.
Originally celebrated every 50 years, Pope Paul II in 1470 changed it to every 25 years so everyone could experience it within their lifetime. The Catholic Church continues this tradition. The Jubilee of 2000 marked the birth of Christ, when John Paul II called for debt cancellation by institutions like the World Bank and IMF, resulting in over $100 billion of debt relief for poor countries.
This year’s Jubilee, called the Jubilee of Hope by Pope Francis, emphasises hope as both a personal and social virtue. It highlights social and economic justice, particularly for the poor. Pope Leo, in his recent exhortation, and Pope Francis both emphasise the need to ensure children worldwide have access to education, health, and opportunities for development, free from crushing debt.
Reverand Jackline Makena Mutuma: As Father said, the Jubilee campaign draws from the biblical call in Leviticus 25 for debt release, land restoration, and freedom from bondage. In this Jubilee Year 2025, proclaimed by Pope Francis, we call to turn debt into hope—through immediate cancellation of unjust, unsustainable debts for climate-vulnerable countries, treated as reparations for the ecological debts owed by wealthy nations. This isn’t charity; it’s justice. Countries like Kenya spend more on debt servicing than on health. People die in hospitals because funds for education, health, and climate adaptation are diverted to debt payments. Climate disasters force more borrowing, degrading lands and livelihoods, while exports go to repay loans – fuelling the very crisis that harms us. As a woman from the Global South, I see how women carry the greatest burden of economic policies designed for the powerful, not the people. Globally, Jubilee calls for systemic reform – a transparent, UN-led debt framework to audit and cancel illegitimate debts contracted under unfair terms, and to suspend repayments during climate shocks. All creditors, public and private, must participate, including through debt-for-climate swaps that redirect funds to renewables and resilience.
At its heart, Jubilee recognises climate debt – the trillions owed by industrialised nations for historic emissions. This demands grant-based finance, ambitious commitments from the Global North, and decolonising global finance, ending double standards where G20 nations borrow freely while poorer nations face austerity. The IMF plays a pivotal role – but too often, it enables injustice. Its debt assessments ignore climate risk, as seen in Zambia’s long restructuring. Austerity measures erode social spending, worsening the debt-climate nexus and pushing extraction over a just transition. We urge the IMF to integrate environmental vulnerability and human rights into its conditionalities, and to support UN-led fair lending principles.
As faith actors, we call for a humane approach to global finance – placing human life, dignity, and justice at the centre. So, I close with this call: Let Jubilee 2025 be real – cancel the debt now, for a fair financial architecture tomorrow.
Amir: At Islamic Relief, we work with the most marginalised, putting community empowerment at the centre of our work. Yet this is becoming harder as global humanitarian funding declines, especially for countries in the Global South. For us, that means responding to people in crisis when states, especially fragile ones, lack the capacity or resources to do so. On debt relief, under the Jubilee initiative in Rwanda, we recommended that when governments borrow, those funds must reach the poorest – not be diverted elsewhere. Yet repayment falls on everyone, including future generations. Nearly every national budget today depends on new borrowing, trapping countries in endless debt cycles.
With shrinking grants, governments borrow more just to fund basic needs like health, education, and infrastructure. But the loan conditions are often so restrictive that governments cannot invest in their priorities. When 60 per cent of revenue goes to debt servicing, poverty only deepens. Our faith texts guide us clearly. The Qur’an, in Chapter 93, reminds us that God found us in need and lifted us – meaning poverty should never be permanent. It calls on us not to oppress orphans or reject those who ask for help. Yet many of our countries are forced to “beg,” submitting proposals and appeals that are often rejected despite genuine need. As faith actors, we believe in preparedness and justice. Like the story of Yusuf (Joseph), who planned for hard times, we must build systems that prevent crises before they begin – not keep returning to debt as the only solution.
Mark: I agree with Martin that solvency, liquidity, and development financing challenges are pressing for low- and lower-middle-income countries, and each requires a different solution. At the IMF and World Bank, we’ve introduced the three-pillar approach to tackle particularly the development financing gap.
Briefly:
- The first pillar focuses on domestic development policies — enhancing growth through investment, revenue mobilisation, and sound policy.
- The second is about ensuring net positive flows from bilateral creditors and MDBs.
- The third focuses on the private sector – ensuring flows stay positive there as well.
You can’t have development if money keeps flowing out; it’s that simple. On our side, we’re reviewing the debt sustainability framework for low-income countries, with stronger climate modelling that can also help evaluate other SDGs. We’re also promoting greater debt transparency – because non-transparent borrowing hurts citizens most.
We know our lending policy says we can only lend when debt is sustainable – and while that’s clear on paper, practice can be trickier. We’re working to close that gap. On debt resolution, restructurings still take too long – currently around 2.5 years, compared with about one year a decade ago. We need better procedures, especially for non-bonded creditors, and improved contractual and statutory approaches – including debt-pause clauses and well-designed contingent mechanisms.
The Jubilee report also mentioned the IMF’s Catastrophe Containment and Relief Trust (CCRT). Yes, that’s how we provide direct debt relief – as we did during the pandemic and the Ebola crisis. Funding remains the main constraint, but where we have it, we can act. Not all countries need debt relief – roughly half of low-income countries are in reasonable shape – but for those that do, we must be ready.
On areas where I don’t fully agree with Martin: first, using IMF resources to repurchase debt sounds attractive but requires strong confidence that there won’t be another restructuring. Otherwise, it risks bailing out private creditors. Second, distinguishing productive vs unproductive debt is problematic. Some define “productive” narrowly – roads, bridges, airports – while excluding education or health. I’d argue those are equally productive, often with even higher returns.
Reverand Dr Kenneth Mtata: The World Council of Churches represents nearly a billion people across more than 120 countries and has long engaged with the issue of debt. From its work, it’s clear that debt is not merely technical or economic – it is profoundly ethical. Debt affects human dignity and life, diverting resources from social spending and trapping governments and populations in cycles of dependency. Much debt is unjust in origin and impact, including odious and colonial-era debt
Debt also perpetuates global inequality, as creditors are largely from the Global North and debtors from the Global South. For faith communities, debt is deeply theological, shaping ethical evaluations and moral responsibility. Recognising these shared responsibilities, the Council proposes a transparent and inclusive debt audit to classify legitimate, odious, and colonial debts, involving civil society, churches, parliaments, and independent experts. Colonial and odious debt should be cancelled, releasing future generations from obligations they did not incur, in the spirit of Jubilee. Finally, a binding UN Framework Convention on Debt should ensure fair, transparent, and timely debt restructuring, shifting governance away from creditor-dominated spaces.
Martin: The IMF paper shows that average restructurings now take about two and a half years, which often provides insufficient relief to restore sustainability — the classic “too little, too late” problem. This outcome reflects the incentives facing all actors in a debt crisis: debtors, creditors, and sometimes the IMF itself as a creditor. It’s a key motivation behind the Jubilee Commission’s work.
There’s room to improve contractual approaches. For example, bonds could have contingent maturities: if amortisation payments are due but market access is blocked, maturities could automatically extend at a reasonable rate. This would increase efficiency under today’s slow restructuring processes.
Current frameworks like New York and English law also have issues. In New York, debts in arrears incur a 9 per cent compensatory interest rate, set in 1981 when US inflation was 8.9 per cent. This clearly incentivises delays and worsens debt distress. Reforming these frameworks could help.
The Jubilee Fund idea is a fund that could repurchase distressed debt. Many countries cannot do this due to lack of liquidity, which drives down bond prices. If liquidity is provided, yields drop, financing conditions improve, and debt sustainability increases. Buying at a discount means a dollar buys more than a dollar of debt, reducing debt levels. Any such fund should operate within institutional lending rules as part of a comprehensive debt resolution strategy. Finally, on productive vs unproductive debt, it can be complicated. Some debt is clearly unproductive, such as IMF lending to Argentina tied to exchange rate manipulation for electoral gain, which does not strengthen the productive system. In these cases, distinctions are easier to make.
Manuela: While I haven’t yet read the Jubilee report, we’re aware of the challenges countries face. The World Bank aims to provide positive net flows to countries in distress. For example, in the Common Framework, we’ve disbursed about $8 billion, half in grants, and increased concessional funding. In fragile, conflict-affected, and vulnerable (FCV) contexts, we prioritise grants over credits and offer debt management support, including training and portfolio management. Transparency is key – both debtors and creditors share responsibility to provide accurate information. Policymakers, parliaments, and citizens need access to this data to make informed decisions and hold systems accountable. We also provide technical support for reporting and monitoring, helping countries manage debt more effectively.
Questions and answers
Representative from Jubilee USA Network: While restructurings now average 2.5 years versus 1.1 years, this only includes countries that apply. Many distressed countries do not apply because they do not trust the available tools. Of all countries classified as in distress or high risk by the IMF and World Bank, 26 have been in that situation since 2018, but only four have used the Common Framework. Many others would rather impose austerity and continue paying than test the current system. This highlights the limitations of relying solely on restructuring metrics, because they only capture a subset of countries and not the broader population that truly needs support.
Representative from Friedrich Ebert Stiftung: You mentioned that integrating climate into DSAs provides a model for progress on other SDGs. Could you elaborate on which SDGs you have in mind?
Student from Georgetown University: The Jubilee report also references underdeveloped Asian countries, like Laos or Pakistan, with high debt exposure to China through the Belt and Road Initiative. Since this operates outside the traditional Paris Club framework, how would the proposed fair debt architecture ensure effective, binding, and transparent participation from China in debt relief aligned with the Jubilee report?
Student from Princeton University: You mentioned efforts to improve climate modelling. How are you considering dynamic scoring of deficits – for instance, differentiating a dollar spent on education or productive investment versus subsidies or other less productive spending – and its impact on growth and sustainability? Additionally, beyond the productive vs. unproductive debt distinction, does it make sense to differentiate borrowing for domestic investment and infrastructure from borrowing that requires foreign exchange? For example, is it sustainable for a country to borrow in dollars to finance domestic infrastructure, or should it rely on domestic financing if the investment is growth-enhancing?
Martin: On lending in local versus foreign currency, the Jubilee Report emphasises that developing countries would benefit from building their own local currency markets. A key challenge is underdevelopment: savings are low while investment needs are high. Often, countries generate savings, but these flow abroad, forming foreign assets. Developing local currency markets would help address currency mismatches, which are common due to low diversification in production and high vulnerability to shocks.
However, experiences after the 2008 financial crisis show that liquidity surges and underdeveloped local currency markets can create instability, especially without macroprudential capital account regulations. Carry trades can make currencies and financing conditions highly volatile. In debt restructuring, local currency debt should be treated differently from foreign currency debt, given its implications for medium-term development. MDBs could play a role in fostering local currency capital markets. For example, infrastructure investments may boost local revenues but not immediately generate foreign exchange, highlighting the need for tailored solutions.
Regarding China, data from 2022 show net negative transfers, much lower than to the private sector, reflecting a changing creditor landscape. The Jubilee Report emphasises comparability of treatment: different classes of creditors should be treated equitably, even if lending terms differ. Equitable does not mean identical, but it is a key challenge, and the IMF is actively working on this.
Mark: Regarding debt restructuring, it’s clear that Ministers of Finance face a challenge when the process is opaque – how long it takes, what relief it will deliver – which undermines trust in the system. Political economy issues also play a role, but while domestic politics may be beyond our control, transparency and predictability can be improved, and that’s the focus. On climate modelling, long-term thinking is essential. Broader climate impacts extend well beyond a four-year horizon, requiring structural models. These models can also be applied to other areas, such as evaluating social spending. That’s why developing the climate module also provides tools for broader policy analysis.
Dynamic scoring is a useful fiscal management tool for designing macro-fiscal frameworks. Poor project selection significantly reduces public investment efficiency – many countries operate 40–50 per cent below the frontier. For example, incomplete infrastructure projects or bridges “to nowhere” yield minimal returns. Dynamic scoring helps optimise investment choices, feeding into the macro-fiscal program; the DSA then assesses the debt implications of that program rather than directly incorporating dynamic scoring.
Regarding China, net negative flows over recent years are problematic, though not intentional – sometimes there are simply no new projects to invest in. The bigger challenge is integrating China into the existing international debt architecture, which was created before it became a major global creditor. Forty years ago, China was a developing country and largely not a global creditor. Initiatives like the Global Sovereign Debt Roundtable aim to help new creditors understand debt restructuring, which is far more complex than corporate bankruptcy. A key point for new creditors is appreciating microcredit risk: even a perfectly executed project at the micro level can fail to generate repayment due to broader macroeconomic constraints, such as insufficient foreign currency availability, entirely unrelated to the project itself.
Representative from DR Congo (Dept. Office): My question is about debt transparency and the role of sovereign credit rating agencies. How can these agencies incorporate equity in their analysis, reflecting the specific challenges countries face, given that ratings affect borrowing costs and debt service burdens?
Representative from the Gates Foundation: Could you give a country example where the three-pillar approach (positive development, net flows from bilateral/MDB creditors, and net flows from private creditors) is being implemented, and the impact observed or anticipated?
Jon Sward, Bretton Woods Project: How do you see SDRs, including their expansion and potential reform, particularly considering recent ESF swap operations?
Martin: Regarding SDRs, private capital flows remain pro-cyclical for developing economies and counter-cyclical for advanced economies, with no global safety net to resolve these asymmetries. SDRs can play a stabilisation and development role: if countries need fewer foreign exchange reserves, they can release resources for investment. The 2021 SDR allocation was helpful and sets a precedent. The report also calls for a coalition of the willing to push for new SDRs, even if some countries, like the US, are resistant.
Mark: On country examples, countries often do not wish to be identified, so the Bank and Fund focus on good practices worldwide relevant to the three-pillar approach, such as liability management, swaps, and domestic resource mobilisation. On credit rating agencies, they primarily model the probability of repayment using historical and political risk factors. The best approach is to engage with them directly and explain the country’s story.
