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global south
Global South Debt Relief Benefits Everyone
Private creditors’ current power to disrupt sovereign debt resolution has negative ripple effects on our own people in the US, especially the most vulnerable.
Jul 10, 2026
Amid a succession of financial shocks, the Middle East war being only the most recent, developing countries’ debt levels are alarmingly high and continuing to rise. These burdens make it even more difficult for governments in the Global South to meet the basic needs of their populations. And because the world is interconnected through international trade and financial markets, these developing country debts boomerang back to harm ordinary people in the United States and other advanced economies as well.
To effectively address this growing crisis, we need to recognize that the debt landscape is very different today than it was in the late 1990s and early 2000s, when global leaders agreed on relief initiatives worth more than $130 billion. Back then, private creditors held only about 5% of developing country debt. The rest was in the hands of public creditors, including the United States, UK, Germany, and other Group of 7 rich country governments, as well as multilateral financial institutions such as the International Monetary Fund and the World Bank, which the G7 largely control.
Today, more than 60% of developing country debt is owed to private creditors who typically have the power to sue for full payment even when collective talks or international community initiatives for debt relief are ongoing. The mere threat of litigation gives these private creditors disproportionate leverage that puts debtors at a disadvantage and erodes debt relief gains. During Ethiopia’s prolonged struggle to access debt reductions under the G20 Common Framework, for example, private bondholders threatened to sue rather than make an effort similar to that of public creditors.
What can be done? One promising approach involves working the levers of power in the jurisdictions that govern private debt contracts. More than 90% are issued in New York and the UK. And over the past year, a bill to crack down on predatory private creditors gained real traction in the New York legislature. The “Champerty Fix Act” would prevent private creditors with debt contracts in that state from purchasing heavily discounted debt and then litigating to collect in full, instead of constructively engaging in debt negotiations. The bill would also significantly cut the high interest rates that debt crisis countries pay on claims under litigation.
Lifting the burden of unsustainable debts is the morally right thing to do—and it is in our interest.
With support from a coalition of religious, business, union, anti-poverty, environmental, development, and diaspora organizations, the bill passed the New York Senate and had enough support to pass in the Assembly, but that chamber’s leader chose not to bring it up for a vote by the time the session ended in early June. Supporters continue to demand that the Assembly be re-opened for a vote on the matter before the end of the year.
This legislation would be a huge win for the billions of people in countries where high debt payments divert essential financing for poverty reduction, social services, and development progress. It would also benefit workers, savers, consumers, and taxpayers in advanced economies—including the United States. Private creditors’ current power to disrupt sovereign debt resolution has negative ripple effects on our own people, especially the most vulnerable.
When debt crises affect US trade partners, jobs and wages that depend on import- and export-dependent companies in the United States inevitably suffer. And when inflation goes up due to supply chain disruptions in countries undergoing debt crises, consumers quickly feel it in the prices of their groceries and other everyday goods.
Pensions and other savings vehicles in the United States have exposure to indebted developing economies either directly—when they invest in instruments they issue—or indirectly—when they invest in US companies that have trade or investment in such countries. Reducing the time it takes a country to go from a debt crisis to a lasting restructuring—which currently averages 10 years—would significantly improve returns for our pensions and savers.
Taxpayers also have a stake in ensuring that taxpayer-funded debt relief does not bail out private creditors unwilling to negotiate fairly. In current restructuring deals, private creditors typically get repayments that are 20 percentage points higher than those received by public lenders.
Debt relief for the poorest has strong religious foundations that cut across multiple faith traditions and has been a landmark bipartisan pillar of US policy under every administration since the late 1990s.
Last year, Treasury Secretary Scott Bessent and his counterparts in all G20 countries adopted a declaration on debt sustainability. As the United States took over this year’s Presidency of the G20, he reaffirmed this direction by making the improvement of debt restructurings and debt transparency a priority. Building checks on private creditors in jurisdictions whose courts they use as leverage would go a long way toward supporting these goals by facilitating successful debt renegotiations.
Lifting the burden of unsustainable debts is the morally right thing to do—and it is in our interest.
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Who Pays for a Broken Energy System? The Case for Climate Reparations
It is time to count the true cost of the climate crisis, and for those responsible to pay their fair share.
Jun 17, 2026
Big Oil and Gas CEOs are raking in obscene profits from the energy shock triggered by the war in Iran, in some cases rivaling the GDP of entire African nations. Meanwhile, ordinary people are left to shoulder the consequences: soaring energy bills, rising food prices, higher costs for medicine, and even the closure of schools. If this crisis does not expose who truly benefits from the world’s dependence on fossil fuels, nothing will.
Wealthy countries justify cutting aid budgets by pointing to fiscal constraints, yet continue to pour vast sums into supporting fossil fuel production. In 2024 alone, implicit fossil fuel subsidies amounted to an estimated $6.7 trillion. But when communities on the frontlines of climate impacts call for reparations or compensation for the losses and damages they have suffered, the conversation suddenly becomes politically contentious and financially unthinkable. The irony is not lost on ordinary people.
This double standard is at the heart of the climate justice debate. It is time to count the true cost of the climate crisis, and for those responsible to pay their fair share.
The International Court of Justice’s (ICJ) recent advisory opinion on climate change offers hope for environmental justice. The world's highest court affirmed what communities have said for decades: Countries have a legal obligation—not just a moral one—to prevent environmental harm, and those harmed may be entitled to reparations. It is telling that some leaders needed the ICJ to remind them of their duty to care for our common home. After 30 climate conferences relying on voluntary, unaccountable processes, we hope this opinion brings real accountability to the United Nations Framework Convention on Climate Change.
Reparations are not charity; they are a necessary investment in the future of people historically harmed by environmental destruction.
As the negotiations in Bonn continue, amid political tensions, a standing agenda item on loss and damage, a theme which has been missing from the majority of the negotiations, will ensure compliance with legal obligations, including on climate reparations, as clarified by the ICJ.
Developing countries must stand their ground. We need an honest, collective reckoning about who causes the harm, who is most affected, and who must pay for the damage. These principles underpin any fair legal system, and there is no justification for treating them as optional
I, along with many others, have argued that dependence on fossil fuels drives rising inequality. Just as importantly, climate change—caused by burning those same fuels—disproportionately devastates vulnerable communities. What happens in the Strait of Hormuz doesn't end there; it ripples through our global energy security. As the war looms in Iran, frontline communities worry about the impending fossil fuel crisis.
The world’s energy dependency is built on extraction, profit, and vulnerability. But who pays the price? It is always the same people on the losing end of this broken system—the very same communities brutally affected by the climate crisis. Those least responsible for conflict pay the price for disruptions to the fossil fuel supply chain, threatening agricultural access and food security. Similarly, those who contribute the least to the climate crisis pay the highest price for its impacts. The system thrives on their vulnerability.
Fossil fuels account for about 86% of global carbon emissions. They are not just an insecure energy source vulnerable to weaponized interdependence; they are the primary driver of climate breakdown. They have disrupted weather patterns and accelerated disasters like intense droughts and devastating floods, harming food systems, cultural heritage, water access, and critical infrastructure like hospitals. This continuous burning has escalated climate injustice in the Global South, Indigenous territories, and Black communities in the United States.
This unequal distribution of burdens is unconscionable. According to Oxfam, a person from the richest 0.1% produces more carbon pollution in a day than someone in the bottom 50% produces all year. Developed countries have already exhausted their carbon budgets, yet they continue expanding extraction. Nations like the US—responsible for over 20% of historical CO2 emissions—carry a massive climate debt that must be repaid.
Meanwhile, developing countries are paying a devastating price for a crisis they did little to cause. Africa is responsible for less than 4% of global historical emissions, yet a single climate disaster can wipe out 5-15% of an African nation’s annual GDP, leaving communities to rebuild alone. This devastation is a lived reality in the Horn of Africa, where millions face climate-induced malnutrition, and in Southern Africa, which is battered by an unending pattern of floods and cyclones.
At the same time, these nations are trapped under mounting debt burdens as they confront escalating impacts with little financial support. It is a harsh reminder that not everyone reaps what they sow. Those on the winning side often do not care, so long as the harm stays far from their doorstep. Someone once asked me if the world would respond to the climate crisis if there was a "major tragedy." My instant thought was that major tragedies are already unfolding in Indigenous territories and the Global South.
The question of reparations remains highly contested because it speaks truth to power and demands true justice. Climate harm has been primarily driven by corporations and Global North governments. The rich nations that benefited from burning coal, oil, and gas must pay their fair share for repair. Through movement assembly work led by Taproot Earth, frontline communities defined what climate reparations must entail: the restoration of healthy relationships, debt cancellation, and accountable systems grounded in Black and Indigenous sovereignty.
Reparations are not charity; they are a necessary investment in the future of people historically harmed by environmental destruction. Current climate finance systems perpetuate injustice by offering loans instead of grants. True climate reparations demand both the abolition of debt and the provision of grant-based finance.
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No Matter Who Wins the Iran War, the Global Economy Is Losing
The most vulnerable populations of the Global South are suffering ever-increasing distress, while most of the world has been experiencing rising inflationary pressures and increasing interest rates on government bonds.
May 26, 2026
For all the uncertainty about what will happen next on the military and diplomatic front in the Iran war, there is certainty about what has already happened on the economic front. And it is not good.
The world has seen a spike in oil prices that has been moderated so far by large drawdowns in global oil reserves. In addition, the most vulnerable populations of the Global South are suffering ever-increasing distress, while most of the world has been experiencing rising inflationary pressures and increasing interest rates on government bonds. And even if the US stock market appears relatively unperturbed, a version of this unpleasant mix has also hit the United States.
Global oil prices are much higher than they were before the war, with the financial market benchmark price of Brent crude late last week (down to $91 on weekend news of a possible deal), well above the $60 per barrel of early January. That said, crude prices have been relatively stable within a broad range over the last two months despite a dramatic drop in energy shipments out of the Persian Gulf since the war began.
According to the International Energy Agency (IEA), as of May 13, the cumulative shortfall in global oil deliveries from the Gulf was roughly 1 billion barrels. This shortfall has been absorbed by reduced oil demand (a consequence of higher prices); increased production outside the Gulf; and by a drop in global oil inventories of roughly 250 million barrels, as these were released to hold down prices in the absence of new production from the Gulf coming to the market. However IEA head Fatih Birol warned last week that inventories were dropping at an unsustainable pace, particularly with summer driving season approaching in the Northern Hemisphere.
For all that US energy exporters might benefit from higher global oil prices, US consumers do not.
The biggest shock from the higher cost (and outright shortage) of fuel, petrochemicals, and fertilizers is being felt by the poorest in the Global South. A recent story in The New York Times described how the price for transporting corn into refugee camps in Somalia had doubled or even tripled, as had the price of water at diesel-powered public tubewells. Meanwhile, protests this week in Kenya against fuel price hikes have led to four deaths, and political and financial stresses are mounting across the continent.
In India, sharp jumps in the price of Liquid Petroleum Gas have hit urban households hard, particularly those whose breadwinners work in small-scale industrial establishments. Many such enterprises rely on LPG as fuel and have shut down, displacing a workforce composed of recent migrants from the countryside. And because informal migrant workers in the city do not have access to India’s price-controlled public distribution systems, they have been forced to purchase cooking fuel on the black market at exorbitant rates. The combination has sparked fears of a repeat of a mass return to the countryside, as happened in the Covid-19 summer of 2020.
Stories like these abound across the Global South. A report from the World Food Program (WFP) two months ago (when the war was two weeks old) projected that 45 million more people could be thrust into acute hunger if the war persisted. And a panel of global officials had already warned the world at the International Monetary Fund meetings in Washington in mid-April that even an immediate cessation of the war would require at least two months before global shipping approached a semblance of normalcy.
Weakness in the real economy of many developing countries has been compounded by financial pressures in the form of larger trade deficits driven by the jump in oil prices, higher inflation, depreciating currencies, drawdowns in central bank reserves, and the threat of central bank rate hikes to keep inflation in check even if the economy is weakening.
In the face of such pressures, many countries were forced to sell foreign exchange or gold reserves to defend their currencies from further depreciation. According to Bloomberg, losses in the Philippines amounted to 8.1% of all reserves, in India to 5.1%, and in Indonesia to 3.8%. India has also imposed stiff tariffs and other restrictions on gold imports, and Prime Minister Narendra Modi has urged Indians to avoid “unnecessary foreign travel,” in additional efforts to limit further pressure on the Rupee from non-energy imports or tourism. And Malawi is reportedly selling not just gold reserves but also semi-processed gold bars bought from local miners.
Europe is less dependent on Persian Gulf oil, with only 7% of it sourced there, as opposed to Asia, which draws roughly 60% of its oil from the region. Even so, it is not immune to the impact of higher prices, with the European Commission’s economic czar warning that the continent faces a stagflationary shock. As a relatively wealthy continent, the EU (and the UK) can afford to grant fiscal subsidies to affected businesses, thus reducing the pain there. However, such measures also force the need to reduce oil demand on the poorest countries that are unable to afford such backstops.
Latin America has proven more resilient to the shocks from the Iran war, helped by the fact that Argentina, Brazil, Colombia, and Ecuador are all net energy exporters, while Mexico runs a small energy deficit but buys most of its natural gas from the US. Chile is the sole large outlier on the front. Still, the energy trade might cushion most major Latin American currencies from sharp depreciation and financial stress, but as an agricultural exporter, the region is vulnerable to higher fertilizer prices and to inflation that could force central banks to raise interest rates.
In the United States, the administration has downplayed the impact of the war on the American people and emphasized how the dramatic increase in US oil production has led to a substantially lower reliance on imported energy. Treasury Secretary Scott Bessent has said that the administration's policies of “energy abundance” have helped the country withstand the shocks from the Iran War. And President Donald Trump said in April that “the United States imports almost no oil through the Hormuz Strait and won’t be taking any in the future…We don’t need it.”
In his recent remarks, Bessent observed that the war had also allowed the US to “focus on the opportunity at hand” as global demand for US energy surged. And, indeed the war has led to a dramatic increase in US exports of crude oil and downstream products. A recent piece in The New York Times noted that the US has exported an additional 145 million barrels of oil since the war began, leading to an increase in revenues of roughly $50 billion.
However, the flip side to this is that US consumers have reportedly spent an extra $40 billion on gasoline prices since the war began. For all that US energy exporters might benefit from higher global oil prices, US consumers do not. And research from the New York Fed suggests that lower-income households were hit much harder by higher energy prices, changing travel patterns in order to keep their gasoline budgets from getting out of hand.
American agriculture, meanwhile, has been hit with a double whammy as two major operating costs, fertilizer and diesel, have both seen sharp price increases. A report last month by the Farm Bureau suggested that 70% of all farmers say they are unable to afford all the fertilizer they need. This in turn could translate into lower crop yields and higher food prices—a worry that is even more pronounced among smallholders in the Global South, underlying the global effects of this war.
And while the US stock market has remained relatively buoyant through all this, boosted primarily by Artificial Intelligence and Semiconductor stocks, there are signs of deeper worries in global bond markets, including in the United States. Concerns over inflationary pressures driven by rising energy and food prices have combined with worries over the rising fiscal costs associated with increased defense budgets, fuel subsidies, and massive reconstruction needs to push global bond yields up significantly.
After annual consumer price inflation in the US jumped to 3.8% (far above the Federal Reserve’s 2.0% inflation target), the US Treasury’s 30-year bond hit its highest yield in 30 years last week. And while that might be good news for those who own newly issued bonds and will receive the interest paid on them, it is less favorable for those looking to buy or refinance a home as mortgage rates rise alongside US government bond yields.
Thus, the impact of this war within the US might not be as severe as that in large parts of the Global South, but even within America, there will be many more who lose than gain from the economic consequences of this war.
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