Sovereign debt is less a financial problem than a tool of neo-imperialist control, our author argues. It is designed to keep the Global South locked in dependency and subordination.
More than three decades ago, Thomas Sankara, revolutionary leader of Burkina Faso, declared that debt was not just a financial mechanism but it was also “a tool of neocolonialism, designed to keep the continent subservient to foreign interests”. His words echo powerfully today. In the past couple of years, debates around the Global South’s looming debt crisis have conspicuously been absent from discussions of imperialism. However, in the Global South itself, the term retains its vigour, as people of the global majority try to make sense of their deteriorating social, economic, environmental, and political situation. This article will explore this post-colonial history and make the case that the global majority’s future will depend not just on development aid or debt relief, but on dismantling the financial architecture of control and establishing a comprehensive set of strategies for structural transformation that brings about peace, justice and sustainable prosperity in a multipolar international economic order.
This article argues that creditors use debt as a tool of neo-imperialist control to continue extracting resources and enforcing economic policies that keep Global South countries at the bottom of the global value chain. As a result, the sovereign debt crisis in the Global South is not merely a series of isolated financial mishaps or the irresponsible and corrupt actions of domestic elites, but rather a systemic outcome of a global economic architecture rooted in colonial legacies and ongoing structural dependency.
Colonial powers established and reinforced dependency by systematically extracting raw materials, cash crops, and precarious labour from countries in the Global South. It is precisely because the colonised were rich with economic potential that the colonial countries conquered them in the first place. David Graeber historicises how our current financial architecture is based on the institution of debt (both sovereign and private) and argues that it functions as a mechanism of subordination of countries in the Global South and as a regime of global governance. Considering this, one must ask in what ways sovereign indebtedness has become a global mechanism of post-colonial control.
The Haitian Experiment
The first time debt was used as a mechanism of post-colonial control was in Haiti in the early 19th century. After its independence from France in 1804, and following two decades of international embargo, Haiti was forced to pay an indemnity of 150 million francs (equivalent to US$21 billion today) to have its independence recognised. This left Haiti with an “independence debt” financed by loans from French banks, which set off a cycle of debt and neocolonial dependency that limited the country’s economic development capacity and constrained its political institutions. For Haiti and its people, debt became a mechanism of generalised dispossession impeding economic autonomy. For decades, Haiti devoted a significant portion of its income to meeting its debt obligations. It was only in 1947 that the country managed to pay off this original debt, which by then had been transferred to new bilateral creditors of the Paris Club, and to multilateral institutions, including the IMF and the World Bank.
Today, more than 62 developing countries allocate over 10 per cent of their revenues to servicing debt
The historical legacy of colonisation left Global South countries with economies heavily reliant on primary commodity exports, vulnerable to external shocks. The debt trap imposed on Haiti was extended to Latin America, with countries such as Peru, Mexico present-day Colombia, Venezuela, Ecuador, and Panama becoming indebted to European banks in the first half of the 19th century. By the mid-20th century, Indonesia, the Philippines, and Malaysia in Asia, as well as Ghana, Zambia, and Côte d’Ivoire in Africa, led the path to independence on their respective continents. Still, they too quickly fell into high indebtedness with bilateral lenders such as the United States, the United Kingdom, and France, as well as multilateral institutions, including the IMF and the World Bank. Thus, the enduring legacy of colonisation provides an analytical framework for understanding how debt accumulation in the Global South underpins the reproduction of financial capitalism, conceived as a world system in both its structural dynamics and functional operations.
We should understand today’s Global South debt crisis as a neo-imperialist form of financial domination, in which the capital-rich Global North wages a sustained and interdependent low-intensity financial conflict against the South. Today, more than 62 developing countries allocate over 10 per cent of their revenues to servicing debt, and in 46 of these countries, interest payments exceed spending on either health or education – affecting the lives of 3.4 billion people.
The Invisible Hand of Debt
This less visible form of control constrains the Global South from altering the balance of political forces or challenging the dominance of financial capitalism. Sovereign debt thus enables the Global North to extend and reproduce its hegemony, securing privileged access to the resources and industrial capacity of indebted countries on highly unequal terms. As a result, creditors force Global South states to borrow in US dollars to stabilise currencies and subsidise essential goods, pushing them deeper into entrenched debt traps. Far from resolving these dynamics, IMF and World Bank policies frequently reinforce them. Ultimately, this system ensures the continued concentration of capital in the Global North and enables the United States in particular to sustain large deficits, including those linked to military expansion, without triggering destabilising inflationary pressures.
Furthermore, the historical legacy of colonisation disrupted the local economies of Global South countries and created dependencies that persist. Global South countries remain the source of cheap and abundant raw materials for the Global North, large consumers of finished goods and technology from the Global North, and the place where obsolete technologies and assembly line manufacturing is outsourced under the guise of trade, development, cooperation, and job creation, when in reality this locks these countries at the bottom of the global value chain. According to a UNCTAD report, developing countries are experiencing a mounting external debt burden, which reached a record US$11.4 trillion in 2023 – nearly four times higher than it was two decades ago and equivalent to 99 per cent of their export earnings. In this low-intensity financial conflict, countries in the Global South suffer from three fundamental structural economic deficiencies that contribute to and perpetuate their high levels of indebtedness.
The World Bank and IMF similarly serve the interests of Global North countries, as their largest shareholders.
These structural economic deficiencies include deficits in energy, food, and manufacturing value-added, which collectively contribute to a persistent structural trade deficit year after year, decade after decade. Consequently, current debt restructuring mechanisms, such as the G20’s Common Framework and the Debt Service Suspension Initiative, are unlikely to resolve the challenges faced by debtor nations. For example, the G20 Common Framework has major flaws that undermine its goal of supporting debt sustainability, including slow negotiations, minimal relief, limited creditor participation, weak links to development goals, and exclusion of needy countries. As a result, it remains largely inaccessible for distressed developing nations. Of 14 low-income African countries facing high debt risk, only four – Chad, Ethiopia, Zambia, and Ghana – have applied for restructuring under this framework. To date, sovereign debt “relief” and restructuring occur largely on the creditors’ terms, who have historically imposed unfavourable agreements and conditionalities. Moreover, creditors have consolidated their power through permanent institutional structures that safeguard their interests, including the Paris Club of bilateral OECD creditors and the London Club of private creditors.
The World Bank and IMF similarly serve the interests of Global North countries, as their largest shareholders. In this context, with creditors operating as a coordinated bloc, sovereign debt “relief” and restructuring initiatives fail to adequately address the structural roots of indebtedness, which extend beyond liquidity issues to encompass trade imbalances, resource extraction, and economic subordination. Within this system, creditors force Global South debtors to prioritise repayments over investments that could help them escape the debt trap. This dynamic accelerates extractive practices and deepens the colonial traps in which these countries are already caught. Ultimately, the current design of the international financial architecture does not merely reflect global inequalities – it amplifies them. A system that claims to support development must not entrench cycles of debt and dependence.
Beyond Debt Relief
According to Fadhel Kaboub, Associate Professor of Economics at Denison University and President of the Global Institute for Sustainable Prosperity, he argues that one cannot democratise a system that has not yet undergone structural and economic decolonisation. It is essential to recognise that sovereign debt is more a tool of neo-imperialist control than a financial problem, designed to keep the Global South locked in dependency and subordination. The reality is that if you track all financial flows – including exports, imports, interest payments, debt relief, illicit financial flows, and remittances from workers – the net amount moving from the Global South to the Global North every year is US$2 trillion. Only 20 years ago, that number was US$500 billion. The consequences of this have been chronic public underinvestment in innovation, human capital, and infrastructure in the Global South. Moreover, in many cases, domestic political and economic elites in the Global South have contributed to these challenges by failing to strengthen public institutions, tolerating or enabling rent-seeking, and avoiding reforms that could have increased resilience and accountability.
One cannot democratise a system that has not yet undergone structural and economic decolonisation.
It is clear that the global financial architecture that facilitates the extraction of wealth from the Global South needs to be dismantled. The Global South is facing not only a debt crisis but also a development crisis, worsened by the climate crisis. In this context, solutions must go beyond temporary relief or modest reductions in debt service. What is needed is a new economic model centred on strengthening long-term investment. Addressing today’s debt crises in the global South requires immediate action and a reorientation of global financial practices toward principles of sustainability, justice, and economic recovery. The guiding objectives must be to halt the outflow of financial resources from debt-distressed countries and to restore debt sustainability in a manner that supports, rather than undermines, human development and environmental stewardship. A more balanced and resilient global financial system should foster collaboration among debtor nations in a way that enables them to share experiences, insights on technical and political challenges, emerging instruments (such as debt swaps), and the development of innovative strategies.
It is clear that the global financial architecture that facilitates the extraction of wealth from the Global South needs to be dismantled.
Given the imperialist roots of the debt trap, South Africa could leverage its G20 leadership to advocate for a reformed global debt framework that strengthens coordination of renegotiation, cancellation, and borrowing while addressing the root causes of the crisis. One key step would be the formation of a Global South-led debtors’ coalition to compel creditors to recognise and engage with this collective. Global South countries should also call for the transfer of life-saving technologies, debt cancellation rather than restructuring, and grants rather than loans for climate action. By combining these measures with regional collaboration to harness resources, labour, and technology – with an emphasis on sustainability, equity, and shared prosperity – these initiatives could drive structural transformation that promotes peace, justice, and sustainable development within a multipolar international economic order.ert.
The views and analyses expressed in this publication are those of the author and do not necessarily reflect the views of the Heinrich Böll Foundation.