Is Seville the moment of truth for the debt crisis?

by Sarah Ganter

Earlier this month, the 4th International Conference on Financing for Development (#FfD4), organised by the UN, was held in Seville. In the run-up to the event, an alliance of diverse civil society organisations and trade unions put forward a number of bold demands, calling for no less than the reform of the international financial architecture, the establishment of a fair international tax system and inclusive multilateral financial institutions. The conference brought together 70 heads of state and government to address pressing questions on equitable financing for development. Spanish prime minister Pedro Sánchez described the international debt crisis as one of the most serious challenges to sustainable development.

Debt and its impact on the countries of the Global South

The international sovereign debt crisis coupled with low tax revenues leaves many countries of the Global South with limited fiscal leeway to invest in sustainable development. Some 3.3 billion people worldwide live in countries that spend more on debt servicing than on health and education, while, according to an Oxfam report, the wealth of the world’s ten richest billionaires grew by an average of 100 million US dollars per day in 2024. The international financial architecture continues to be shaped by the legacy of colonial power imbalances. And climate change is only compounding the challenges faced by developing countries. On top of all this, we are seeing trade conflicts, a US withdrawal from development cooperation and a general decline in Official Development Assistance (ODA).

FfD4 and the unsatisfactory Compromiso de Sevilla

The 4th International Conference on Financing for Development (#FfD4) aimed to build new momentum toward achieving the Agenda 2030 Sustainable Development Goals (SDGs) and to reaffirm the strong commitment to bilateral ODA obligations. The Sevilla Commitment (Compromiso de Sevilla), which was adopted by consensus ahead of the conference – albeit without the participation of the United States – is certainly a positive sign of life from a multilateralism long thought to be dead. In terms of substance, however, the agreement falls short.

Especially when it comes to the issue of debt, the document was far from the game-changer many had hoped for. While the G7 has mainly focused on reforming the G20 “Common Framework for Debt Treatments”, the countries of the Global South and civil society representatives have been calling for a more inclusive debt resolution system established through an intergovernmental process under UN auspices. Indeed, UNCTAD proposed the creation of a Global Debt Authority some years ago. The Compromiso de Sevilla, in contrast, proposes no more than the creation of a UN working group to examine the gaps in the existing system.

Shared power and genuine participation

At a side event in Seville hosted by the Friedrich-Ebert-Stiftung in cooperation with the Association of German Development and Humanitarian Aid NGOs (VENRO), the African Regional Organisation of the International Trade Union Confederation (ITUC) Africa and other partner organisations, participants voiced increasingly strong calls for “shared power” and the genuine participation of debtor countries in developing debt solutions. In the past, these countries have been excluded from critical decision-making processes, which remain dominated by the G20 or the OECD. Another key demand has been for social and environmental aspects to be better integrated into debt sustainability assessments. Here, too, the Compromiso envisages the UN Secretary-General convening a working group involving the International Monetary Fund (IMF) and the World Bank. The group is tasked with developing a set of voluntary principles for responsible sovereign borrowing and lending.

The Friedrich-Ebert-Stiftung’s New York office already published a series of expert papers on this subject in 2024. These thematic publications reveal three key insights:

1. Debt sustainability analyses are not merely technical assessments; they are also shaped by political considerations.
2. Debt sustainability assessments must meaningfully account for the impacts of climate change and social inequality.
3. Transparent processes enhance effectiveness and strengthen stakeholder trust in debt sustainability analyses.

National legislation to reinforce multilateral efforts

More important than the resolutions adopted in Seville are the tangible outcomes of the conference. Based on the FfD4 outcome document, within the framework of the Sevilla Platform for Action (SPA), coalitions of countries and stakeholders put forward 130 concrete project proposals. One of these was the establishment of a “Borrowers’ Forum” aimed at facilitating the exchange of knowledge and experience among debtor countries and supporting joint positioning. Another key initiative was the formation of the “Debt Pause Clause Alliance”, which seeks to promote the suspension of debt servicing in the event of climate-related disasters or public health emergencies.

Alongside measures at the multilateral level, national legislation can also create more legal certainty and sustainable borrowing practices. Such laws can help ensure

• greater transparency;
• democratic oversight;
• more responsible use of resources;
• the protection of human rights and the environment.

In the lead-up to the Seville conference, as part of its global End the Sovereign Debt Trap #ETDT project, the Friedrich-Ebert-Stiftung published a series of background papers exploring what forms such legislative initiatives might take.