26th Session of the Working Group on the Right to Development Interactive Dialogue: “Debt Crisis and the Right to Development”

 

 

Excellencies, Distinguished Participants,

At the outset, I wish to thank H.E. Mr. Zamir Akram, Chair-Rapporteur of the Working Group on the Right to Development, for his kind invitation to participate in this timely interactive dialogue, along with other distinguished speakers whose expertise lends great weight and insight to this event.

This conversation takes place at a significant historical moment—not only in view of upcoming multilateral fora such as the Fourth Conference on Financing for Development and the 16th Ministerial Conference of UNCTAD—but also because it coincides with the Jubilee Year currently being celebrated by the Catholic Church. The Jubilee is a time for justice, mercy, and renewal. As such, it offers a moral lens through which we must examine the sovereign debt crisis and its impact on human development.

Debt is not merely a financial issue. It has profound moral implications. The future of billions of people is tied up in debt burdens that they can neither create nor repay. The Bull of Indiction of the Jubilee Year 2025, Spes non confundit, calls for debt cancellation as a matter of justice and solidarity. The biblical notion of Jubilee is evoked to remind the world that unjust financial burdens are symptomatic of deeper fractures in our global systems, fractures that violate the dignity of the human person. The cancelling of debt has long been embedded in the Jubilee tradition.

The Jubilee is “an appropriate time to give thought, among other things, to reducing substantially, if not cancelling outright, the international debt which seriously threatens the future of many nations,” [1] especially of poor nations, so that peoples can emerge from the conditions of extreme poverty in which they live. This moral imperative remains ever relevant.

It was against this backdrop that the Holy See Mission, together with UNCTAD, organized a High-Level Event on debt justice a few months ago, as a way to launch a dialogue and a space for discussion on this important issue. It is therefore a pleasure to see that the conversation is continuing to move forward.

Today, I want to stress that the debt crisis cannot be separated from the development crisis. The external debt of developing countries has quadrupled in two decades, reaching a record $11.4 trillion in 2023—nearly equivalent to 99 percent of their export earnings.[2] More worrying than the debt itself is the burden of servicing it: low-income countries now spend three times more on external debt service as a share of income than they did a decade ago. The average developing country spends 16 percent of export earnings on debt service—more than three times more compared to the 5 percent cap set by the 1953 London Agreement for the recovery of post-war Germany.

In addition, more than 3.3 billion people live in countries that spend more on debt interest than on health or education. When essential services are sacrificed to repay loans, people pay the price, development is hampered and justice is denied.

Since the Heavily Indebted Poor Countries (HIPC) Initiative, there has been a major shift in the composition of creditors. Private and non-Paris Club creditors now dominate, making restructuring more complex. The increase in domestic borrowing further complicates debt management and restructuring efforts.

This situation is not just a technical dilemma, but a call to action in the awareness that the debt crisis is not an isolated issue, but a symbol of a deeper rupture in global commitments to justice and solidarity. Etymologically, the word “symbol” derives from the Greek sumballo (συμβάλλω), which means “to put together, to match.” In ancient Greece, a “symbol” was not something abstract or detached from reality. Rather, it was something like a token, a piece of wood or a shard of pottery. When two parties reached an agreement, they might break a piece of pottery or a tablet in two and each party would keep a half. The matching pieces could later be “put together” to verify the identity of the parties or to prove the agreement. This reminds us that the debt crisis “symbolizes” a wider breakdown in global cooperation and justice. But just as the two halves of the symbol had to be reunited to reveal their original meaning, so too must our understanding of debt and development be brought together.

Allow me to recall some principles that should be respected in all ethical financial relationships, including in addressing the debt crisis and the right to development.

 

1. Primacy of Human Dignity and the Common Good

Economic systems must serve people, not the other way around. The dignity of the human person must be the guiding principle of all financial and development decisions. As Pope Benedict XVI affirmed in his Encyclical Letter Caritas in Veritate, “The economy needs ethics in order to function correctly – not any ethics whatsoever, but an ethics which is people-centered.”[3] Similarly, Pope John Paul II’s Encyclical Letter Sollicitudo Rei Socialis taught that development is not just economic growth. It should be a contribution to the fulfillment of the human vocation.[4]

2. Ethical Responsibility in Lending and Borrowing

The principles of responsible borrowing and lending should be at the center of an ethical financial relationship.

Individual debtor countries should be responsible in the fight against corruption, lack of transparency and accountability, mismanagement of public fund or misuse of loans.

However, as Pope Francis noted in his Encyclical Letter Laudato Si’, the foreign debt of poor countries should never become a means of controlling them[5] and should be paid in ways which do not compromise their growth and the basic need of their people.

It is also important to recognize that borrowing for development can be legitimate. When debt is used to finance investment in health, education, infrastructure, and sustainable development, it can generate the very means of repayment.

3. Respect for Justice

The principle of responsibility must be combined with respect for justice. “[W]hile reaffirming the principle that debts must be repaid, ways must be found that do not compromise the ‘fundamental right of peoples to subsistence and progress.’”[6] Affluent nations should “acknowledge the gravity of so many of their past decisions and determine to forgive the debts of countries that will never be able to repay them. More than a question of generosity, this is a matter of justice.”[7]

In this context, it is important to recall another type of debt, for which usually the indebted nations are in fact the creditors: the ecological debt. The wealthiest nations have contributed disproportionately to environmental degradation; yet it is the poorest who suffer the consequences. Droughts, floods, deforestation, desertification, and other extreme weather events—often in the Global South—are the price paid for a development model that has neglected the planet. Justice demands that this ecological debt be recognized and repaid.

4. Global Solidarity

True justice and shared responsibility should be realized within a framework of global solidarity—one that recognizes the interdependence of nations and ensures that debt relief and financial policies do not isolate economic decisions from their human consequences.

Adequate international support, including increased grants, concessional financing and reduction in the debt service burden, are essential elements for debt relief. Domestic revenue mobilization is also necessary. Private sector participation could be increased, as well as innovative financial instruments, such as sovereign contingent debt instruments, which link payments to a country’s ability to pay; climate-resilient debt clauses, which provide breathing space in times of disaster; local currency debt, which avoids exchange rate fluctuation; and debt-for-climate or debt-for-development swaps, which align the interests of creditors and debtors.

Restructuring will be necessary for countries facing unsustainable debt burdens. In this respect, progress has been made in debt restructuring cases, including through the G20 Common Framework. Unfortunately, progress has been slow and austerity measures imposed during debt restructuring have disproportionately hurt people in vulnerable situations.

Tools such as human rights impact assessments of loans and their conditionalities can help ring-fence the fiscal space needed to realize the rights to health, education, and social protection, among others—while enabling creditors and borrowing Countries to share responsibility for preventing unsustainable debt situations.

Excellencies, Distinguished Participants,

The Holy See does not propose specific technical solutions. Rather, it calls on States, international institutions, and experts to engage in urgent, inclusive, and ethical dialogue to identify effective and just ways forward. Profit alone cannot be the measure of our success. The real criterion must be the dignity of the human person and the common good.

This Working Group can make a significant contribution to ensuring that economic choices today enable integral human development and respect the rights of all, while protecting the weak and restoring hope to those shackled by unjust debt. A new ethic means being aware of our responsibilities to others and to the world, including for future generations.[8]

Thank you very much.