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Staving off default: How unsustainable debt is threatening human progress
Three-fifths of the world's lowest income countries are debt distressed and in danger of default. Navid Hanif, assistant secretary-general for economic development at the United Nations, tells GZERO's Tony Maciulis that we need to make debt more sustainable by restructuring it. Hanif believes multilateral development banks, such as the World Bank, should offer affordable longer-term loans with lower interest rates to allow least developed countries better opportunities to deal with crises like climate change, poverty, and educating children.
During a conversation at the World Bank/IMF spring meetings in Washington, DC, Hanif explains how a financial divide will eventually become a development divide, which is not good for the world. He explains the urgency of the growing debt problem.
However, Hanif also expresses optimism about the potential for progress coming after years of the pandemic, citing the growth in people gaining access to the internet and a renewed commitment to climate goals.
The world "is more coupled than we think"
Rania Al-Mashat, the Egyptian Minister of International Cooperation, tells GZERO's Tony Maciulis that the pandemic taught us how interconnected we truly are; no one nation can solve a problem as big as climate change, food insecurity, or geopolitical strife on its own. Al-Mashat makes the case for looking beyond the short term problems of inflation and toward longer-term solutions for the most pressing issues of our time.
In a conversation at the World Bank/IMF spring meetings in Washington, DC, she explains the key outcomes of last year's UN Climate Conference COP27, held in her home country, and what the road ahead looks like for climate financing and confronting the looming sovereign debt crisis.
Al-Mashat also states that in the coming months we will learn the new framework and path forward for the World Bank and IMF, institutions whose models have been both challenged and criticized during this historic period of global crises.
Human rights activists demand the safe return of Ricardo Lagunes and Antonio Díaz, community defenders who disappeared on January 15. Mexico City, Mexico, January 22, 2023.
Hard Numbers: Environmentalists targeted, World Bank outlook improves, mass shooting in Louisville, fiery cocktails in Northern Ireland, Winnie-the-Pooh gets punched
24: This year alone, at least two dozen environmental activists have already been murdered or disappeared in Mexico and Central America, according to an investigation by The Guardian. Many are from indigenous communities protesting against mining activities on their traditional lands.
2: Outgoing World Bank President David Malpass revised the international lender’s 2023 global growth outlook on Monday, bumping it from 1.7% to 2%. He credited China’s improved economic trajectory for the change. Malpass, who plans to step down in June, kicked off his final World Bank/IMF Spring Meetings with the news.
145: The mass shooting at a bank in Louisville, Kentucky, on Monday was at least the 145th incident of its kind in the United States since the start of this year, according to the Gun Violence Archive. Five people – including a close friend of the state governor – were killed and nine injured when a disgruntled bank employee opened fire.
4: On the eve of President Biden’s trip to Northern Ireland to celebrate the 25th anniversary of the Good Friday Agreement, at least four men were spotted hurling petrol bombs at police. The incident occurred during a parade organized by people who oppose the agreement, which ended decades of conflict between Irish nationalists and the British government. For more on the contentious history, read our primer here.
300: A wildly popular new patch worn by Taiwanese fighter pilots shows a native Formosan black bear punching Winnie-the-Pooh – a common satirical stand-in for Chinese president Xi Jinping – in the face. The patch has been around for a year, but orders blew up this weekend after China conducted its mock invasion of Taiwan. A little e-commerce research shows that you too can own one of these patches for a mere 300 NT$ (about US $9.60).
Ukraine's President Volodymyr Zelenskiy awards a Ukrainian service member at a position near a frontline, in Donetsk region, Ukraine March 22, 2023.
What We’re Watching: Zelensky’s Bakhmut message, Rishi’s post-Brexit win, Trudeau’s take on Haiti, Ethiopia’s peace progress
Russia and Ukraine score points where they can
Volodymyr Zelensky visited frontline troops in war-ravaged Bakhmut, located in Ukraine’s eastern province of Donetsk, on Wednesday as Russian drones struck across the country. While planning for the trip was surely well underway before Vladimir Putin’s surprise stop in Russian-occupied Mariupol last weekend, the contrast underlined Zelenksy’s signal of defiance.
By appearing in Bakhmut very near the fighting, Zelensky reminded the world that, six months after Putin mobilized 300,000 new Russian soldiers for a deeper advance into Ukraine, even the small city of Bakhmut remains beyond their grasp.
In other war news, Russia has warned it will respond harshly to shipments from the UK to Ukraine of anti-tank munitions made from depleted uranium. Moscow claims this step adds an escalatory nuclear element to the conflict. In response, the UK insists the Russian position is propaganda, that the use of depleted uranium is common in anti-tank weapons, and that it contains nothing that can be used to make nuclear or radiological weapons. Finally, Russia has announced a plan to raise an additional $8 billion in revenue by changing the way oil profits are taxed.
All these stories underscore the reality that, while little has changed on the battlefield, Russians and Ukrainians are still looking for every small advantage they can gain in what looks increasingly like a war of attrition.
Has Brexit got “done” yet?
In a win for PM Rishi Sunak, the British House of Commons on Wednesday passed a reworked post-Brexit deal for Northern Ireland, which was agreed to last month with the European Commission.
Essentially, the proposal known as the Windsor Framework creates two lanes for trade: a faster-flowing green lane for goods transiting only between Britain and Northern Ireland and a red lane with more rigorous customs checks for goods bound for Ireland and elsewhere in the EU. It is unlikely to come into effect for several months as details are ironed out, officials say.
Still, despite the big margin of victory, more than 20 Tories – including Sunak’s two predecessors Liz Truss and Boris Johnson – voted against the measure, with Johnson saying it would mean that the UK won't be able to fully embrace the benefits of Brexit (what benefits, he didn’t say). It also signals that in the run-up to next year’s general election, Sunak will continue to deal with a vocal Euroskeptic wing within his party.
Meanwhile, six representatives from Northern Ireland’s Democratic Unionist Party also rejected the vote, suggesting that the DUP would not lift its boycott on the Northern Ireland legislature, which began almost a year ago. The lack of resolution on this front will make for awkward optics as President Joe Biden heads to Belfast next month to mark the 25th anniversary of the Good Friday Agreement that ended the Troubles.
Trudeau’s take on Haiti
President Joe Biden heads north on Thursday for his first presidential visit to Canada, where he and PM Justin Trudeau are expected to discuss a variety of issues, from defense and immigration to trade and Ukraine (see our look at likely agenda items here). But Biden is also expected to make some demands about … Haiti.
The situation in the Caribbean nation has deteriorated in recent months. Police have lost control to local gangs, and more than 200 Haitians were killed in the first half of March alone.
The Biden administration is reluctant to get more involved itself but wants Canada to take the lead in addressing the chaos in Haiti. Why Canada? The country has a long track record as a peacekeeper and has had prior involvement (for better or worse) in Haiti, making it an obvious choice from Washington’s perspective. An uptick in Haitian migrants seeking entry to the US and Canada raises that urgency further.
But Trudeau says that “outside intervention” can’t bring long-term stability to the country, and it’s hard to argue with the historical record on that. Meanwhile, many in Haiti worry that outsiders would merely prop up unelected acting PM Ariel Henry. And it didn’t help that Haiti’s largest newspaper ridiculed the recent deployment of two Canadian ships to patrol the coast.
All of this puts Trudeau in a tough spot: Biden wants him to be a reliable security partner beyond Ukraine, but the political fallout from a failed entanglement in Haiti could be disastrous for him. While the Canadian leader will likely make a commitment of some sort for Haiti, will it be enough to satisfy Biden or change the dynamics in Haiti itself?
*From trade and migration to defense, culture, and technology, the US and Canada need each other more than ever. To meet the moment, GZERO Media is launching GZERO North, a new weekly newsletter offering an insider’s guide to the very latest political, economic, and cultural news shaping both countries. Subscribe today!
Ethiopia, TPLF take steps in tenuous peace
The Ethiopian government is removing the Tigray People’s Liberation Front from its list of terrorist organizations, part of a peace deal with the rebel group signed last November. The decision moves the country closer to what observers hope is an enduring peace after a brutal two-year civil war that has claimed an estimated 600,000 lives.
The situation is very delicate. The agreements don’t include all of the various combatants and are vague about who controls certain disputed territories. And while all sides reportedly committed war crimes, many Tigrayans believe the deal doesn’t hold the Ethiopian federal government accountable. PM Abiy Ahmed’s resistance to a UN investigation inspires little hope.
Still, the momentum is towards peace, for now. Economic interests are part of the reason why. Ethiopia is in bad shape, as the country is wracked by famine, drought, and an estimated reconstruction price tag of $20 billion. A lasting peace would enable Ethiopia to reopen two-year-old talks with the IMF on a $26 billion loan restructuring plan, which was interrupted by the war. Still, with so much bad blood – will these incentives be enough to bind the former combatants to a durable peace? All parties must still tread very carefully …
A servicewoman holds a rifle during the graduation ceremony of the officers of the Armed Forces of Ukraine of the Hetman Petro Sahaidachnyi National Academy of Land Forces, in the Lviv Region of western Ukraine.
Hard Numbers: Women warriors of Ukraine, baby drought in Japan, cash for Colombo (not Peter Falk), tragic ending in Mexico
50,000: Every day is women’s day in Ukraine’s defense against Russia. As many as 50,000 women are currently serving in the Ukrainian military, more than triple the number when Russia first invaded in 2014.
799,728: After nearly a decade of steady decline, the number of babies born in Japan last year reached a record low of just 799,728 last year, prompting an adviser to PM Fumio Kishida to warn that “if we go on like this, the country will disappear.” Read our recent piece on why Japan is having so few babies, and what the government wants to do about it.
2.9 billion: Finally, a lifeline for Sri Lanka. The island nation, battered by the worst economic crisis in its history, is set to receive a $2.9 billion loan from the IMF later this month. Sri Lanka is already past due in paying China back nearly three times that amount, but Beijing recently agreed to a two-year pause on the payback.
2: Two of the four Americans kidnapped by heavily armed men in a northern Mexico border town have been found dead, and the remaining two have been rescued and returned to the US. The abduction may have been a case of mistaken identity: The gunmen reportedly mistook the travelers for Haitian drug smugglers, when they were really part of a group of friends who traveled to the town of Matamoros for affordable cosmetic surgery.
US House Minority Leader Rep. Kevin McCarthy (R-CA) attends a press conference in Washington, DC.
What We’re Watching: McCarthy in trouble, Lula 2.0, global recession fears
Dramatic US House speaker election
Who will replace Nancy Pelosi (D-CA) as the next speaker of the US House of Representatives? Good question. As members of the 118th Congress are scheduled to be sworn in on Tuesday, Rep. Kevin McCarthy (R-CA) is still short of the votes necessary to lead the chamber. Even after making a major concession to his GOP critics by allowing them to fire him at any time, a handful of far-right Republicans remain publicly opposed to his speakership. If McCarthy doesn't get at least 218 votes on the first ballot, the lawmakers will continue voting until someone gets a majority. Keep in mind that the speaker sets the legislative agenda and decides which bills make it to the floor, so whoever gets the gig will hold a lot of sway at a time when Republicans aim to use their slim House majority to investigate the Biden administration and stymie the White House on anything from funding the government to continuing US aid for Ukraine.
Lula takes over (again) in Brazil
Luiz Inácio "Lula" da Silva was sworn in on Sunday for a third term as Brazil’s president, a post he last held from 2003 to 2010. In his two inauguration speeches, the left-wing Lula vowed to unite Brazilians but also lashed out at his far-right predecessor, Jair Bolsonaro, promising to hold the previous administration to account for botching Brazil's pandemic response and to revoke Bolsonaro's loosening of gun restrictions. (The outgoing president skipped the ceremony to hang out with his buddy Donald Trump at the former US president's Mar-a-Lago estate in Florida.) So, what's next for Brazil under Lula 2.0? Although the new president begins his term in office with his approval rating in the high 50s, his honeymoon period will likely not last long. What's more, Brazilian politics remain deeply polarized, and high inflation + a weak economy means Lula will likely need to raise taxes in order to spend big on social programs for the poor.
IMF bearish on 2023 economic growth
The IMF has some bad news: A third of the world’s economies are heading into recession in 2023. This shouldn't come as a complete surprise. After all, when the IMF cut its economic outlook last fall, the war in Ukraine, inflation, rising interest rates, and zero-COVID in China were already peaking. Now, the message from IMF chief Kristalina Georgieva is clear: 2023 is going to be a “tough year.” While the world’s biggest economies will see a slowdown, even those economies not technically in recession will feel like they are. Why? The US, the EU, and China are slowing down — each in its unique way. While China rolls back its zero-COVID policies, it suffers through a surge of infections. Meanwhile, the EU remains most affected by the economic fallout of Russia’s war in Ukraine. What about America? According to the IMF, the US economy is teetering, but it’s still the most resilient and might just avoid recession.Hard Numbers: China's fake fishing fleet, forever Obiang, Iran's deadly protests, IMF lending spree
280: China is paying commercial trawlers more than they can make by catching fish to stay anchored for at least 280 days a year in the disputed Spratly Islands in the South China Sea. This is just one of the many ways China is using civilian ships to augment its naval power and help enforce its maritime claims in the region.
6: Africa's longest-serving head of state, strongman President Teodoro Obiang of Equatorial Guinea, will "run" for a sixth term in office next year. Obiang has called the shots in the oil-rich West African nation since he deposed his uncle in 1979, and is expected to eventually hand off to his playboy son, VP Teodorín Obiang.
41: At least 41 people have been killed in one week of widespread protests across Iran after a woman was beaten to death for failing to wear a headscarf as the mullahs have decreed. President Ebrahim Raisi is threatening a crackdown, while the US is pushing to keep Iranians online.
140 billion: As of Aug. 31, the IMF has issued loans worth a record $140 billion this year. Countries deep in the red like Sri Lanka and Zambia are now negotiating bailouts, and Ghana, Egypt, and Tunisia are likely to follow as interest rate hikes to fight inflation and a strong US dollar make it more expensive to pay off debt.An FBI photograph of documents and classified cover sheets recovered from former US Pesident Donald Trump's Florida estate.
What We're Watching: Trump obstruction evidence, IAEA team in Zaporizhzhia, IMF-Sri Lanka bailout deal
Did Trump conceal top-secret documents?
Donald Trump repeatedly blocked US law enforcement from accessing highly-classified documents stored at his Mar-a-Lago residence (and lied about how many files remained there), according to a scathing new document released Tuesday by the Department of Justice. The filing came in response to a recent request by the former president that the documents — seized from his Florida estate by the FBI on Aug. 8 — be reviewed by a third-party arbiter to decide if any are covered by executive privilege. (The DOJ opposes this on the legal grounds that the records don’t belong to Trump.) It’s the most detailed account to date of the months-long attempt by the National Archives – an independent agency that stores and preserves government records – to obtain classified files Trump took from the White House after the 2020 election. The filing includes a photograph of documents labeled “Top Secret” and claims that some material was so sensitive that some FBI and DOJ personnel required additional security clearances to review them. Crucially, it also states that “efforts were likely taken to obstruct the government’s investigation” after Trump’s legal team ignored in the spring a grand jury subpoena seeking all classified documents. A federal court decides Thursday whether the arbiter can be brought in.
Nuclear inspectors in Zaporizhzhia
A team of International Atomic Energy Agency inspectors finally arrived Wednesday in Russian-controlled Zaporizhzhia in southeastern Ukraine. Despite heavy fighting in the area, they plan to visit the city’s contested nuclear power plant on Thursday. The group — which excludes US and UK members, as demanded by Moscow — will assess the damage from shelling and power outages that last Friday briefly disconnected the facility from Ukraine’s power grid, raising fears of another Chernobyl at Europe's largest nuclear plant. The IAEA had been asking for access to the site since March, when Russian forces took over the facility. Indeed, the task will be anything but easy: the inspectors want to interview Ukrainian workers and establish a permanent monitoring mission at the site. The Kremlin reluctantly agreed to the latter, but won't withdraw to create a demilitarized zone around the perimeter. Kyiv, for its part, is worried that Moscow will threaten workers not to speak out against the Russian presence there, giving a false impression to the international inspectors that everything is under control. Meanwhile, southern Finland reported Wednesday small amounts of radioactive isotopes, which could indicate a leak from the Ukrainian plant. Although the source is unknown, in 1986 the first hint that something had gone horribly wrong in Chernobyl was unusually high levels of radiation detected at a nuclear plant in southern Sweden. Just in case, Ukraine is doling out iodine pills to people living near Zaporizhzhia.
Down-and-out Sri Lanka close to IMF deal
Mired in its worst economic crisis ever, Sri Lanka has reportedly reached a bailout deal with the International Monetary Fund. Good news for the government in Colombo, which in May became South Asia’s first to default on its foreign debt in over two decades. Years of economic mismanagement and graft under the former Rajapaksa dynasty pummeled Sri Lanka’s economy. More recently, big tax cuts in 2019 decapitated the country’s main source of revenue, while COVID decimated its tourism industry and slashed remittances. As its foreign currency reserves dried up, Colombo resorted to printing more money, pushing inflation to a whopping 70% in July. Scarce food and fuel in recent months caused mass social dislocation, prompting a run on the presidential palace and President Gotabaya Rajapaksa to flee the country. News of the IMF deal came one day after new President Ranil Wickremesinghe released his first budget, which includes some tax hikes that will be painful to the struggling poor and middle class. What’s more, Sri Lanka still needs to restructure around $30 billion of debt owed to foreign creditors — including China. That might be challenging, considering that Sri Lanka is often cited as a case study in the perils of China’s debt trap diplomacy.