Is debt forgiveness a good idea?

Is debt forgiveness a good idea?
You've lost your job and can't pay your bills. Your debt is growing, and it's not clear when (and if) you can pay it off. Or maybe you're a lender who needs to get paid back — even if that means accepting less money later than planned—because you've got financial worries too. This is the grim reality now taking hold in every region of the world.


Governments, particularly in poorer countries, and the institutions and investors who loan them cash to keep them afloat, face these very same challenges. As coronavirus lockdowns shutter the global economy, countries like Argentina, South Africa, Iraq, Venezuela, Zambia, Lebanon, and many others are warning of dire consequences if they can't get debt relief during this severe global economic slowdown.

Institutional lenders are trying to help. The G20 group of the world's largest economies has suspended debt repayments until the end of this year for 73 of the world's most vulnerable countries. It has also called on multilateral lenders like the IMF and World Bank, as well as private investors, to offer something similar. The hope is that by restructuring the debt – postponing but not erasing it — they won't be forced to think about large-scale debt forgiveness to avoid a bigger crisis. After all, the G20 governments have their own bills to pay.

This raises a question: Is full debt forgiveness a good idea? There are some good arguments in its favor.

  • It's the fair thing to do. The most deeply indebted countries didn't create this crisis. The global pandemic is not the result of any irresponsible decisions on their part.
  • Poorer countries need to spend their money on fighting the coronavirus. Some African countries, for example, are spending up to five times more on debt repayment right now than on managing their health crises. The rest of the world should help these governments fight this virus, because as economist Joseph Stiglitz wrote recently, "as long as the pandemic is still raging anywhere, it will pose a threat — both epidemiological and economic—everywhere."
  • Wealthy nations have good reason to fear economic collapse in poorer countries, because economic and health crises can produce cross-border flows of refugees, violence, and disease.
  • Secrets can kill. When wealthy countries refuse to help, fear of collapse encourages the governments of poorer countries to hide the true scale of their public health crises, and that can kill many more people within these countries and transmit disease across borders.

But...to simply tear up those IOUs creates problems of its own.

  • Debt forgiveness sets a precedent that governments don't have to repay debts they can't afford. And wouldn't that act of generosity signal to these governments that they don't really need to prepare for future emergencies?
    • Consider the creditors. Wealthy countries and international institutions face heavy financial pressures of their own – foregoing expected debt repayments hurts their bottom line too.

    This time last year, world health experts were speculating about why Africa appeared to have escaped the worst of the global pandemic. Younger populations? Natural immunity created by exposure to past viruses? Something else?

    They can stop wondering. Africa is now in the grip of a COVID emergency.

    More Show less

    Get insights on the latest news in US politics from Jon Lieber, head of Eurasia Group's coverage of political and policy developments in Washington:

    House Speaker Nancy Pelosi barred two Republican members from serving on the Jan. 6 commission. What's going on?

    Well, the Jan. 6 commission was designed to be a bipartisan commission, taking input from members from Democrats and Republicans. House Minority Leader Kevin McCarthy had the opportunity to make recommendations but the Speaker of the House, Nancy Pelosi, could always veto those recommendations. In this case, she did, saying no to two members, Jim Banks and Jim Jordan, both of whom are strongly aligned with President Trump and who voted against certifying the election results in 2020. The Republicans for the most part see the Jan. 6 commission as an opportunity to score political points against them, and the Democrats say this is going to be a fair, non-biased, and nonpartisan investigation into what happened on Jan. 6, starting with a hearing next week with some of the police officers who were involved in the battle with the protesters inside the Capitol.

    More Show less

    In his New York Times op-ed, David Brooks says the US is facing an identity crisis — protecting liberal and progressive values at home while doing little to stop autocrats elsewhere. But has the US really abandoned its values abroad just because it's withdrawing from Afghanistan? Ian Bremmer and Eurasia Group analyst Charles Dunst take out the Red Pen to argue that the US can advance democracy without being the world's sheriff.

    More Show less

    When the Tokyo Olympics begin on Friday, Japan watchers will be following more than just the performance of Japan's star athletes, including tennis star Naomi Osaka. They will also be tracking the political fortunes of Prime Minister Yoshihide Suga, who is taking a big gamble by staging the event — amid a raging pandemic — in the face of strong and longstanding opposition from the Japanese public. What are the stakes for Suga, particularly with elections on the horizon? Eurasia Group senior analyst Ali Wyne explains.

    More Show less

    YouTube pulls Bolsonaro's rants: Google-owned YouTube pulled down a series of videos on the channel of Brazil's populist President Jair Bolsonaro, accusing him of spreading misinformation about the pandemic. YouTube removed more than a dozen clips for touting quack cures for coronavirus or claiming, in defiance of scientific experts, that masks don't reduce COVID transmissions. Last year, Twitter and Facebook also removed some content from Bolsonaro's feeds for similar reasons. But critics say that YouTube's move is too little too late, because Bolsonaro has been spreading misinformation about COVID since the pandemic began. Many Brazilians hold him personally responsible for the country's abysmal pandemic response, which has led to almost 550,000 deaths, the second worst toll in the world. Will YouTube's move change Bolsonaro's message? His weekly address to the nation, where he converses not only with government ministers but also various conspiracy theorists and loons, is broadcast on YouTube. Surely he doesn't want to risk losing that — or does he?

    More Show less

    Boycotts! Bans! Protests! Drugs! Think you've got gold medal knowledge about politics at the Olympics? Test what you know with this special Tokyo Olympics Quiz. And to stay current on all the latest political stories at the Games and around the world, subscribe here to Signal, our daily newsletter. Now, without further ado, the first question is...

    More Show less

    28: The UK and the EU have again failed to agree on post-Brexit trade rules for Northern Ireland, which is part of the United Kingdom. In a 28-page document, the British government had suggested further changes to trade rules that were already negotiated as part of the Brexit settlement, but Brussels was not having any of it.

    More Show less

    Subscribe to GZERO Media's newsletter, Signal

    GZERO World with Ian Bremmer. Watch episodes now

    GZEROMEDIA

    Subscribe to GZERO Media's newsletter: Signal

    GZERO World with Ian Bremmer. Watch episodes now

    GZEROMEDIA

    Subscribe to GZERO Media's newsletter: Signal