As Jubilee year draws to a close, debt crisis remains unresolved
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Article summary
- Global debt has reached unprecedented levels, exposing systemic injustices that make borrowing costlier and riskier for developing countries.
- FfD4 fell short of a reset but centred debt justice within UN agenda.
- Growing dominance of private creditors remains key issue in multilateral debt restructuring processes.
Debt is a systemic issue rooted in currency hierarchies and colonial dynamics, and simultaneously intertwined with climate vulnerability, inequality and unjust multilateral governance (see Observer Autumn 2022). Global sovereign debt has reached unprecedented levels, now exceeding 235 per cent of world GDP. Two-thirds of low-income countries are either in or near debt distress, while advanced economies are carrying their highest public debt since the Napoleonic Wars.
Against this backdrop, 2025 has become pivotal for debt justice. With the Catholic Church’s Jubilee year coinciding with the Fourth International Conference on Financing for Development (FfD4), global attention returned to the principles of Jubilee 2000: debt as a moral and structural issue, and the need for periodic relief to restore fairness and dignity. Yet today’s debt architecture falls far short. The G20 Common Framework, debt swaps and climate-linked bonds largely protect creditor interests. At the centre stands the IMF, whose conditionality and debt sustainability assessments undermine economic sovereignty and contribute to cyclical debt crises.
As Tim Jones of UK-based civil society organisation (CSO) Debt Justice UK notes, “the combination of IMF and World Bank loans, and public spending cuts, allow the debt to keep being paid, but at huge cost. Debt cancellation is urgently needed to prevent this crisis becoming a disaster for poverty and human rights.”
The experiences of Zambia and Ghana highlight this dysfunction. Both were beneficiaries of the Heavily Indebted Poor Countries Initiative (HIPC), yet both defaulted again in 2020 and 2022 respectively. Their return to crisis demonstrates that the austerity policies mandated by the IMF and World Bank and the inequities of the international financial architecture, including the higher costs of borrowing for low- and middle-income countries continue to reproduce the vulnerabilities the 2000 Jubilee sought to end.
The treatment of Global South countries contrasts with that of the Global North during times of crisis. The 1953 London Agreement halved West Germany’s external debt and stretched repayments over decades on favourable, growth-linked terms. Yet, even contemporary reflections shy away from these historical facts: the Jubilee Commission report avoids calling for comprehensive debt cancellation, underscoring how far global discourse has drifted from the boldness of Jubilee’s vision 25 years ago.
From ambition to reality: the FfD4 commitments on debt
While the outcome document of FfD4 – the Compromiso de Sevilla – did not deliver the full reset many had demanded, it nonetheless created political space for progress. Advanced economies – led by the EU – blocked a UN Framework Convention on Sovereign Debt, however the strong advocacy of CSOs, the Africa Group and Alliance of Small Island States, secured an intergovernmental process, ensuring that debt reform remains on the UN agenda and opening the door to more ambitious steps in future negotiations. Other emerging opportunities include the formation of a borrowers’ club, co-led by Zambia and Egypt with UNCTAD support, which aims to strengthen negotiation capacity, share analytical tools and advance common principles for fair restructuring – signalling a step in the right direction.
Equally significant was the decision to bring credit rating agencies (CRAs) formally into the UN Financing for Development process through a high-level meeting on sovereign ratings. While CSOs demands for a public UN credit rating agency remain unfulfilled, this marks the first time the UN has created a mechanism for CRAs – long criticised for their pro-cyclical downgrades, lack of transparency and disproportionate influence on borrowing costs. CRA assessments shape the cost of capital for countries, often worsening stress when downgrades hit during crises. Crucially, these ratings and the IMF’s Debt Sustainability Assessments (DSAs) influence and reinforce each other: once the Fund signals vulnerability, CRAs tend to downgrade, raising interest rates and reinforcing the very risks they identify.
This procyclical dynamic is exactly what the IMF’s ongoing review of its Low-Income Country Debt Sustainability Framework (LIC DSF; see Inside Institutions, What is the World Bank & IMF debt sustainability framework for low-income countries? ) must confront. The framework’s limited early-warning capacity and failure to account for market reactions mean that distress is recognised only once crisis has fully taken hold. The IMF concedes debt relief has often been “too little, too late” but defends caution to preserve market access. Yet evidence shows that earlier, pre-emptive restructurings produce far better outcomes – i.e., shorter crises and fewer defaults.
Private creditors: the missing pillar in the global debt architecture
As the multilateral system struggles to deliver meaningful reform, the private sector remains the missing piece of the global debt puzzle, now holding over 60 per cent of low- and middle-income countries’ external debt. Without binding rules for private participation, multilateral initiatives risk being undermined by creditor resistance – rooted in an IMF-centred model that prioritises market access and investor confidence, setting the “rules of the game” in which private creditors wield disproportionate leverage (see Observer Summer 2025).
In this context, the 2023 New York Sovereign Debt Stability Act was hailed as a landmark reform to bring fairness and predictability to debt workouts, yet the bill stalled under financial-sector pressure, mirroring the UK’s hesitation over similar reforms. Instead, new initiatives are rising like the London Coalition on Sustainable Sovereign Debt, aimed at bringing together governments, investors and private creditors under “enhanced coordination.” Yet, as Debt Justice UK noted, this is “a coalition of creditors, not a coalition for debt justice.” Relying on voluntary engagement and market-based principles, it reaffirms creditor dominance rather than challenging it.
“In 2026, the debt movement enters the UN arena as countries and civil society push for fair, enforceable rules. However, dialogue without binding obligations, risks entrenching power imbalances. For Jubilee principles to take hold, private creditors must be bound, systemic IMF–World Bank reform prioritised, and debt cancellation placed at the centre of global debate,” said Iolanda Fresnillo of Belgium-based CSO Eurodad.
