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📅 Join the next one.The debt crisis isn’t just about money – it’s about sovereignty. When countries spend more on debt service than on health and education combined, we are not witnessing economics, but a system of rule by extraction that locks societies into dependency and forecloses democratic choice. This synthesis captures key themes from the fifth Senterej Series dialogue. Watch the recording here for the full details of a profoundly insightful conversation. See these full notes and the chat history here.
“The winner doesn’t write history alone or only. The winner writes the future as well, by putting frameworks, standards, rules of engagement.” (Mahmoud Mohieldin)
Mahmoud Mohieldin’s observation, delivered at the G20 meetings in Johannesburg, cuts to the heart of why global debt architecture persists in systematically dismantling the future of billions. The institutions created by the victors of World War Two don’t merely interpret the past – they constrain what futures remain possible. And the future they’re currently shaping is one where countries must default on their children’s health and education to honour obligations to creditors.
Our fifth Senterej Series dialogue brought together three experts who’ve spent decades working within, critiquing, and attempting to reform these institutions: Mahmoud Mohieldin, bringing experience from the UN as Special Envoy for Financing the 2030 Agenda and the UN Secretary General’s commission proposing 11 reforms to global financial architecture; Dr Daniel Bradlow (Danny), senior G20 advisor and legal scholar; and Lola Allen, consultant on international financial reform. Peter Lipman moderated.
What emerged wasn’t just technical critique but a portrait of how power reproduces itself through institutional design – and where the fractures in that reproduction might create space for transformation.
The current debt crisis differs from previous ones in a crucial way: everyone saw it coming. As Mahmoud noted,
“Many people saw [the debt crisis] coming, including the World Bank, well before the COVID crisis. Yet it persists because, as he termed it, this is “the silent debt crisis” – named because “the borrower doesn’t like to admit that they have problems, and the creditors are of different types.”
The landscape has fundamentally shifted. The old Paris Club now represents only 10% of low-income country debt, down from 40% two decades ago. Power has fragmented across market borrowers, emerging economy creditors (particularly China), and commercial entities – each with different interests and no shared transparency norms.
But the most devastating metric isn’t about creditor composition or debt-to-GDP ratios. It’s this: in many countries, debt service now costs more than investment in human capital combined. “In many countries, it’s either higher than health service or higher than education,” Mahmoud explained. “But I’m concerned that in many countries the cost of borrowing is higher than what is being spent on the investment in human capital.”
The implication is stark:
Countries are avoiding defaulting in their commercial debt by defaulting in their sustainable development goals. Countries are meeting contractual obligations to creditors by abandoning obligations to their own citizens’ futures. More than 3 billion people live in countries spending more on servicing debt than on health and education combined.
The Common Framework, established by the G20 as a mechanism for debt resolution, exemplifies how institutional design can ensure dysfunction serves particular interests.
Danny described its fundamental flaw: a sequential negotiation structure that creates cascading vetoes. “First, they’re supposed to go to the IMF. The IMF does its debt sustainability analysis… Once the IMF does that, the country is meant to negotiate with its official creditors… And then once that’s done, it begins negotiating with its commercial creditors.”
The result? Zambia has spent over four years trying to restructure its debt and still hasn’t finished. As happened in the Zambian case,
“If the commercial creditors reach an agreement that the official creditors don’t like because they think it’s not comparable, they can delay the negotiation until they are satisfied, and that’s why it takes so long.”
But the design flaw runs deeper. The biggest creditors for many African countries are multilateral institutions themselves – the World Bank, IMF, and African Development Bank. These claim “preferred creditor status,” meaning “they don’t have to cut how much they’re owed. They just say they will get new funding.” They get paid first, before anyone else.
The problem multiplies when African regional institutions – the African Export Import Bank, Trade and Development Bank – also claim preferred creditor status. As Danny explained: “If all those institutions have a preferred creditor status, it means there are fewer institutions to contribute to the actual debt relief.”
Lola Allen challenged the entire premise.
“The IMF supposedly has a mandate to maintain global stability, established in the aftermath of the Second World War, when it was at the apex of its industrial power… climate change wasn’t on the agenda. We didn’t have a multipolar society to the same extent as we do today. So, we have to ask: stability for whom and at what cost?”
The voting structure reveals the answer. The United States holds 16.5% of voting power – effectively a veto. The entire African continent of 54 countries holds just 6.5%. The IMF reflects 1944 power dynamics, not 2024 realities.
When countries turn to the IMF in crisis, they don’t find policy space – they find what Lola termed “a policy straitjacket, which leads to austerity, privatisation and deregulation.” These measures “erode public services, weaken labour protections, and push countries deeper into extraction to earn foreign exchange.”
Argentina, the IMF’s largest debtor, exemplifies the trajectory.
“What was once one of the most industrial states in the Americas has been rapidly deindustrialised under IMF surveillance,” Lola explained. “It has exited the Paris Agreement. Environmental protections have been rolled back, labour rights gutted, social safety nets obliterated.”
Argentina will pay $6 billion in surcharges alone through 2030 – penalty fees imposed on countries already in deep distress. Lola’s conclusion: “This is debt coercion, and it shows that fossil fuel dependence is not just an accident… it’s being actively built in or baked into loan agreements.”
Debt restructuring intersects with another dimension of corporate power that Lola highlighted: investment treaties that lock countries into extractive models across generations.
“Many countries signed investment treaties in the 1990s that even if they did exit them, still have sunset clauses that lock in fossil privileges and investor privileges well into the future.” These treaties allow corporations to sue governments through secretive tribunals if policies “interfere with their interests.”
The mechanism is straightforward: “If countries try to negotiate debt, bondholders sue. They try to phase out fossil fuels; oil companies sue for lost profits. They try to strengthen environmental standards through laws, and they face multi-billion-dollar claims.”
This isn’t exceptional – it’s the business model. “This litigation is not an exception. It’s very much part of the business model, and it keeps countries locked into extraction dependency and debt for generations to come.”
Perhaps nowhere is the crisis more urgent than in the intersection with climate breakdown. Countries face an impossible choice: service debt or address the climate emergency.
Mahmoud articulated the bind:
“Countries are having to cut what they spend to deal with the climate crisis, either in mitigation or adaptation, let alone loss and damage… because of their debt service obligations, or they’re having to promote things like coal and other kinds of dirty technologies, because that’s the quickest way of earning money to pay back their creditors.”
When Peter Lipman noted that Jamaica’s recent typhoon caused damage exceeding 200% of GDP, the absurdity of “debt sustainability” frameworks became clear. Countries facing such devastation are simultaneously expected to service existing debts whilst rebuilding – often by borrowing more.
Danny introduced a potentially transformative development: the International Court of Justice’s recent unanimous advisory opinion on climate obligations. Over 100 countries submitted statements – rare global consensus – and the ICJ ruled that all subjects of international law have binding customary obligations.
Two obligations matter for debt: First, “an obligation to prevent harm to the environment and to do whatever is necessary to prevent harm, which means doing due diligence and impact assessments.” Critically, this is “an obligation of conduct, not of results.”
Second, “an obligation to cooperate to deal with economic, social and cultural problems that have global impact, and that a healthy environment is a precondition to doing that.”
Danny drew the connection explicitly:
“[The ICJ ruling] means that when countries restructure their debts, all the participants – that includes the debtor as well as the creditors – have an obligation to understand what the impact of what they’re committing to is in terms of environment and human rights.”
This isn’t aspirational. It’s binding international law that creates potential forums for challenging debt agreements that force countries into climate-destructive paths.
Danny identified why debt negotiations consistently fail to address development or human needs: “Everybody acknowledges sovereign debt is not just a financial and legal problem. It’s a multifaceted development problem… But when the negotiations happen, the negotiations happen around the contract between the debtors and the creditors.”
This means negotiations focus entirely on “what kind of accommodation the creditors have to make because the debtor is no longer able to live up to promises made in its contracts.”
What gets externalised? “There’s no space in those negotiations for talking about all the debtor’s other legal commitments – under its constitution, to its public sector workers, under international treaties, to the development problems that it has.”
Both Danny and Mahmoud recalled President Kaunda’s question from the 1980s debt crisis: “Why should we have to starve our children in order to pay our creditors?” Everyone dismissed him as naive. Danny’s response: “There are many things you can say about him but calling him naive is definitely not one of them. He knew exactly what he was doing, and that question has never received a full answer.”
Decades later, with climate crisis added to the equation, the question remains unanswered.
Despite grim diagnosis, concrete alternatives are emerging. The most significant: a borrowers club being formed as the Global South’s answer to the Paris Club.
Mahmoud explained: “This debt forum is basically going to be a marketplace of ideas, where creditors would meet borrowers for knowledge sharing, for technical assistance.” Eight countries are leading the work.
Danny clarified its strategic purpose: “The point is not to negotiate debt transactions as a group – that’s a fool’s errand. It’s to create a forum for peer learning, capacity building, sharing information, greater transparency, and developing coherent positions that can strengthen individual countries’ negotiating positions.”
The Sevilla conference produced 11 specific proposals for reforming architecture, from improving early warning systems to reforming the Common Framework to new SDR issuances. Danny also highlighted largely unknown resources: “The IMF has something like 90 tons of gold on its books at $50 an ounce when market value is around $4,000 an ounce” – hundreds of billions in potential liquidity.
But Danny emphasized an important constraint often missed in calls to abandon institutions: “For some countries, especially extremely capacity-constrained countries, they need the current system because they just don’t have the capacity to engage and create alternatives.”
For small nations, the existing system provides “access to the market of 166 other countries. That’s just extremely powerful.” Revolutionary change risks abandoning precisely those countries most needing protection from big-power bullying.
A provocative intervention came from Indy Johar who challenged the entire framing. He argued that appeals to human rights aren’t working because
“the value of being human is systemically diminishing relative to assets.”
His diagnosis: “The historic arguments where you say, ‘Oh, you invest in human capital and it has economic benefits,’ I’m not sure those arguments even stand up anymore. The fundamentals of our arguments are being ripped away from us.” Indy proposed an alternative
“Africa should be leading on currency innovation and resource currency innovation… Because of the resource frameworks that exist in Africa, that liquidity can be constructed.” The idea: bypass the debt architecture entirely through stable coins and alternative currency mechanisms.
Mahmoud offered important cautions about dollarisation risks and loss of monetary control: “Stable coins could be the best thing that happened or the worst thing ever that happened… This could be the open gate for losing control over your money supply.”
But the suggestion points to what Indy Johar called “oblique pathways” – innovations that bypass rather than beg the old architecture.
Mahmoud invoked Keynes’s rejected vision: the bancor, where “all the country currencies today could really be the new SDRs, monetised as the new stable coin.” Technically feasible. Politically? “Will it be politically endorsed? I doubt that. I wouldn’t really bet on it.”
Danny added an important caveat about idealizing Keynes:
“Keynes was there as the advocate for a seriously compromised debtor country. What he was proposing was suitable for a debtor country, and he never mentioned the needs of colonies which were not independent. I would be wary of relying too much on Keynes with the optimal outcome.”
Peter Lipman invoked Immanuel Wallerstein’s observation: we nominally decolonised, but former colonies now face such onerous debt and extractive trade systems that they remain effectively colonised through extraordinary net payment flows from Global South to Global North.
Lola confirmed: “That’s exactly what’s been happening… There’s very clearly a resource flow going from south to north. This is not a question of charity. It’s a question of an outrageous system.”
She identified a specific leverage point:
“These are public development banks, and there’s a fair amount of pressure that we can still put on these institutions to set baselines in what debt agreements can involve. Multilateral development banks funded through public budgets should be accountable to align with climate commitments like the Paris Agreement. Yet “there’s only been nominal commitment on the part of multilateral development banks to align themselves.”
Danny’s framing acknowledged the depth of challenge: “We’re victims of path dependency. The world’s been on this path for hundreds of years, and we’re now trying to reverse a system developed over that period of time.”
This is “extremely difficult to do, even if you put aside all the vested interests and geopolitical power relations that keep it functioning the way it does.”
The strategic approach: “What we’re trying to do is come up with where the gaps are, where we can make changes that are not dead ends, but that will help us keep going in a dynamic way on a path forward to something more sustainable and fair.”
Yet alternatives exist. Vietnam rejected rigid WTO rules and now exports $372 billion annually through sovereign industrial policy. Rwanda banned clothing imports to grow its local textile industry. Regional integration proceeds across ASEAN and Africa despite global institutional breakdown.
Mahmoud’s pragmatic strategy when asked about collapse: “Regionalise, localise, projectise.” Build solutions at scales where agency exists whilst working toward global reform that may not come soon.
As Lola emphasised: “We’re not lacking ideas and we’re not lacking resources, albeit they’re going in the wrong direction. But what we’re lacking is political will from some and the courage to break the spell of financial orthodoxy.”
Mahmoud offered a blunt assessment of human rights advocacy: “The issue of human rights is not really visible in the whole discussion… People do care about human rights, but the leadership of many countries don’t, and this is the problem.”
Even enlightened self-interest fails. During COVID, former OCHA head Mark Lowcock argued that “even if you don’t care about others, care about yourself” – self-interested support should motivate cooperation. Yet “because of their transactional, short-term selfish approach, leaders are pushing us away from holistic, comprehensive, long-term solutions.”
Danny pushed back against dismissing human rights frameworks: “If you look at major creditor banks and asset managers, they all have human rights policies, easily findable on their websites, yet they never seem to use them in sovereign debt. At some point, their bluff is going to need to be called.” He pointed to emerging leverage: “There’s enormous climate litigation going on around the world… Mining companies have changed dramatically because of that.” Recent judgments against major banks for financing activities connected to terrorism suggest human rights and finance accountability litigation may have implications “way beyond just that particular case.”
With the G20 summit approaching in Johannesburg, Danny assessed South Africa’s year with measured realism. “South Africa and the African Union have been very successful in raising awareness of how serious the debt problem is… But whilst successful in raising awareness, it hasn’t been very successful in getting action.”
The summit faced unprecedented challenges with five leaders not attending. Yet progress occurred in working groups: “The development working group managed to reach consensus and issue a declaration. There’s been some work around critical mineral issues.”
[South Africa’s G20] year achieved something important: The awareness of the debt issue and development financing crisis in Africa is much greater now. There’s greater understanding of how serious the problem is and how much need for solution exists.
Mahmoud admired “the leadership of South Africa that despite all these political-economic dynamics, is trying to get something out from that whole mess in the world today, with deficit of trust and surplus of crisis.”
Mahmoud’s pragmatism shaped his reform approach: “We don’t need to make the perfect enemy of the good. We have some good proposals that can fix some problems. But they are far from perfect.”
Context matters enormously: “We are at a bottom low when it comes to international cooperation… We are in tension when it comes to geopolitics and geo-economics.” Wars in Ukraine and the Middle East create environments not “conducive for major reforms.”
Yet this returns to his opening observation about winners writing futures: “Nothing will happen on the monetary side, financial side, or economic side if the political side is not reformed. We are very far from it, unless we realise we’re in a different world from that inherited in the 1940s.”
The institutions created by WWII victors weren’t just historical artifacts – they were designed to shape future possibilities according to victors’ interests and worldview. Meaningful reform requires recognising this origin and the path dependency it created.
Susi Moser asked the question many avoid: what happens if the system doesn’t change?
Danny cautioned: “If she means the whole system collapses…. That’s the Bretton Woods moment, where the world we know has ended and has to be reconstructed on completely different basis.” He reminded participants: “We’ve had hints through the global financial crisis and COVID crisis. The world handled one reasonably well through the G20. The COVID crisis was handled terribly because there was zero-sum response to vaccine distribution.”
Lola’s assessment: “During COVID and financial crises, we’ve seen countries step up with exceptional liquidity injections, but responses were both uneven and unequal throughout the world.” She observed “countries squashed between a rock and hard place, trying to play between big powers without seriously annoying either. Very uneven and unequal responses, perhaps with windows of opportunity, but not the answer.”
As Mahmoud acknowledged, we may already be experiencing collapse unevenly. The challenge is ensuring what emerges serves human flourishing and planetary regeneration rather than new forms of extraction.
The debt-trap architecture isn’t a temporary crisis to be managed through better policies. It’s a fundamental feature of how global power operates in the post-colonial era – forcing countries to default on obligations to citizens whilst honouring obligations to creditors who themselves violate international law on climate and human rights.
The system’s design – sequential vetoes, preferred creditor statuses, IMF conditionalities, investment treaty protections – ensures creditor interests supersede everything else, including planetary survival.
Yet within this reality, transformation spaces exist: the borrowers club offering collective voice; regional integration proceeding despite dysfunction; the ICJ climate opinion creating legal obligations; hidden IMF resources that could be mobilised; and oblique strategies through new currencies and institutions that bypass rather than reform.
The question Susi raised remains urgent: not just what happens if the system doesn’t change, but what opportunities open after collapse. The challenge is ensuring transformation serves flourishing rather than new domination.
As Mahmoud’s observation reminds us: the winners of World War Two created frameworks shaping not just how we remember the past, but what futures remain possible. Changing those frameworks requires recognising their origin, understanding their path dependency, and building organised power to imagine and implement alternatives.
The debt-trap architecture is both more powerful and more fragile than most realise. Understanding it isn’t a specialist concern but an urgent requirement for anyone serious about justice, development, or survival in an age of polycrisis. The question is no longer whether the system will change, but whether its transformation will be planned or chaotic, liberatory or apocalyptic.
The Senterej Series continues with the next dialogue “Beyond Finance: Blueprints for Post-Capitalist Cooperation” exploring what economic relationships designed for regeneration rather than extraction might look like.
Dr. Mahmoud Mohieldin is an economist with over 30 years of experience in international finance and development, currently serving as the United Nations Special Envoy on Financing the 2030 Sustainable Development Agenda. Most notably for debt discussions, he leads a group of prominent experts appointed by the UN Secretary General to promote solutions for resolving the debt crisis and joined a prestigious commission created by the Pontifical Academy of Social Sciences and Columbia University’s Initiative for Policy Dialogue tasked with developing reforms to address the sovereign debt and development crises affecting countries across the Southern Hemisphere.
His extensive institutional experience includes serving as Executive Director at the International Monetary Fund (2020-2024), representing twelve Middle Eastern countries, and holding multiple senior positions at the World Bank Group (2010-2020), including Senior Vice President for the 2030 Development Agenda and Managing Director overseeing sustainable development, poverty reduction, and economic management. Prior to his international roles, he served as Egypt’s first Minister of Investment (2004-2010), where he led significant economic reforms that enhanced the business environment and restructured state-owned enterprises.
Dr. Mohieldin holds a Ph.D. in Economics from the University of Warwick and serves as Professor of Economics and Finance at Cairo University, with visiting positions at Columbia University and the Brookings Institution. He has authored numerous publications on economics, finance, debt, investment, and development, including recent works on public-private engagement in sustainable development and the political economy of crisis management and reform.
Lola Allen is an associate consultant with the Climate and Energy Justice Collective and an associate researcher with the Center for Economic and Policy Research (CEPR). A policy strategist and researcher with over a decade of experience in climate finance, energy transition policy, and multilateral development bank reform, she works at the intersection of global financial reform, trade, and just decarbonization strategies.
Between 2021 and 2023, she collaborated with a global network of parliamentarians advancing Green New Deals and their international counterparts, contributing to declarations signed by lawmakers from more than 40 countries. Earlier, she served as an advisor to the Ecuadorian government (2009–2016) on development planning, science and technology policy, moving away from dependency on oil and gas, access to medicines, and South–South cooperation.
Daniel D. Bradlow is Professor/Senior Research Fellow, Centre for Advancement of Scholarship, University of Pretoria; Senior G20 Advisor, South African Institute of International Affairs; Compliance Officer, Social and Environmental Compliance Unit, UNDP; Senior Non-Resident Fellow, Global Development Policy Center, Boston University and Professor Emeritus, American University Washington College of Law. His recent publications include The Law of International Financial Institutions, (OUP, 2023) “A New Conceptual Framework for African Sovereign Debt: Finding an Optimal Outcome that Addresses 5 Challenges”, 33 Journal of African Economics Supplement 2 pp162-177 (2024) https://doi.org/10.1093/jae/ejae023 and”Re-thinking the sustainability of sovereign debt” (with R. Lastra and S. Park), 27 Journal of International Economic 2 (2024) https://doi.org/10.1093/jiel/jgae020 A complete list of publications is available at: https://hq.ssrn.com/submissions/MyPapers.cfm?partid=283289
Peter Lipman (Moderator) is the former founding chair of Transition Network and Common Cause Foundation and previously chaired the UK government’s Department for Energy and Climate Change’s Community Energy Contact Group. After careers as a teacher, co-operative worker, intellectual property lawyer, and external affairs director at Sustrans, he established Anthropocene Actions, a community interest company promoting fair, loving, and ecologically regenerative societies.