International Debt

Before judging, one must define. The vocabulary of sovereign debt is technical, and confusions are frequent. Three distinctions suffice to frame the debate.

External debt, sovereign debt, debt service

Sovereign debt is debt contracted by a State. It becomes external debt when it is owed to foreign creditors and, most often, denominated in a foreign currency — dollars, euros — which the debtor country does not control. This detail is crucial: a State that borrows in its own currency can, as a last resort, create it; a State indebted in dollars must earn those dollars through its exports in order to repay. If it fails, it sinks deeper.

What strangles is not so much the total amount of the debt as its service: the sum of interest and principal repayments due each year. A country can show a "sustainable" debt on paper and yet see its debt service absorb a disproportionate share of its revenues, to the direct detriment of health, education and infrastructure spending. This is the crowding-out effect: every dollar paid to creditors is a dollar taken from schools and clinics.

Why does a country borrow?

The reasons are many and not all are morally equal. A country may borrow to invest in its development — roads, ports, dams, electrification — in the hope that future growth will repay the present effort. It may borrow to absorb a shock: the collapse of the price of a commodity on which it depends, a natural disaster, a pandemic. But debt can also arise from less avowable causes, which the Compendium of the Social Doctrine lists unsparingly:

"Behind this crisis lie causes that are complex and of different kinds, both at the international level — fluctuation of exchange rates, financial speculation, economic neocolonialism — and within the indebted countries themselves — corruption, bad management of public money, use of loans received for purposes other than those intended." — Compendium of the Social Doctrine of the Church, § 450^[2]

The Church therefore does not ignore the internal responsibility of indebted countries: corruption, embezzlement and sumptuary or military spending play their part. But it immediately stresses the fundamental injustice: "the greatest sufferings […] strike the populations of indebted and poor countries, which bear no responsibility"^[3]. The people pay a debt they neither contracted nor benefited from.

A moral question, not only a technical one

Here lies the heart of the matter, and what justifies a Catholic encyclopedia taking it up. International debt is not only a problem for economists: it is a textbook case of international social justice. The principle that "a debt that is contracted must be repaid" is reaffirmed by the Church — it has never advocated generalized default. But this principle stands in tension with another, still more fundamental one: the right of peoples to live. The whole of social teaching on debt consists in holding these two demands together without sacrificing the second to the first.

This articulation presupposes a background that social doctrine never ceases to recall: the goods of the earth are destined for all. The universal destination of goods does not abolish property or contracts, but it sets a limit to them: no creditor's right may be exercised to the point of depriving a people of what is necessary. International debt is one of the places where this truth is verified most starkly.

Long before it was a file of international economics, debt was a biblical theme. And Scripture's position is constant: debt is a legitimate reality, but never an absolute. The creditor does not have every right; the debtor is never reducible to his debt. The Law of Moses, the prophets and the Gospel instead organize regular mechanisms of remission and liberation.

The sabbatical year: "you shall grant a release of debts"

Deuteronomy institutes a seven-year rhythm at the end of which debts between Israelites were to be cancelled:

"At the end of every seven years you shall grant a release. And this is the manner of the release: every creditor shall release what he has lent to his neighbor; he shall not exact it of his neighbor, his brother, because the Lord's release has been proclaimed." — Deuteronomy 15:1-2^[4]

This shemitah ("release", "remission") is not a measure of pure compassion: it is ordered "in honor of the Lord". It inscribes in the Law the idea that a just society needs periodic remissions to prevent debts from turning into perpetual servitude and gaps from hardening into castes. The same passage moreover orders lending to one's poor brother "expecting nothing in return", and warns against the heart that closes as the year of release approaches.

The jubilee: "proclaim liberty"

Leviticus goes further still. Every seven cycles of seven years, the fiftieth year is declared a jubilee — from the Hebrew word yôbēl, the horn sounded to announce it:

"And you shall hallow the fiftieth year, and proclaim liberty throughout the land to all its inhabitants; it shall be a jubilee for you, when each of you shall return to his property and each of you shall return to his family." — Leviticus 25:10^[5]

The jubilee combined remission of debts, liberation of slaves and restoration of lands sold under the pressure of need. Its logic is explicitly theological: if no one can possess the land absolutely, it is because "the land is mine, says the Lord, and you are strangers and sojourners with me" (Lev 25:23). Man is not the ultimate owner; he is a steward. It is this page, and namely "the Book of Leviticus", that John Paul II would cite to ground the call to remit the debt of nations^[6].

Nehemiah: against the enslavement of brothers

The biblical ideal does not remain theoretical: it commands concrete decisions. On returning from the Exile, Nehemiah discovers that the notables of Jerusalem have reduced their poor brothers to debt slavery, demanding pledges, fields and children. His reaction is scathing:

"Restore to them this very day their fields, their vineyards, their olive orchards, and their houses, and the interest on money, grain, wine, and oil which you have been exacting of them." — Nehemiah 5:11^[7]

Nehemiah imposes the remission of debts and restitution under oath, before the priests. The lesson is crystal-clear: between brothers, the creditor's right cannot extend to enslavement. Transposed to the scale of nations, this is exactly the question raised by international debt.

"Forgive us our debts": the Gospel

The New Testament takes up this language and interiorizes it. In the Our Father, the request for forgiveness is formulated in terms of debt:

"And forgive us our debts, as we also have forgiven our debtors." — Gospel according to Saint Matthew 6:12^[8]

And Jesus illustrates this reciprocity with the parable of the unforgiving debtor (Mt 18:23-35): a servant whose king has just remitted a colossal debt — "ten thousand talents" — at once refuses his fellow servant a derisory debt — "a hundred denarii". The master rebukes him harshly:

"Should not you have had mercy on your fellow servant, as I had mercy on you?" — Gospel according to Saint Matthew 18:33^[9]

The disproportion between the two sums is the soul of the parable: no human creditor can stand on his rights after having received from God a remission beyond all measure. This spiritual truth, as will be seen, is not a pious ornament added to the economic file: it is its key.

The Church did not wake up to the question of debt in 1980. Its reflection on money lent at interest is one of the oldest in moral theology, and it is on this soil that its modern teaching grew.

The long suspicion of usury

For centuries, the Church condemned usury, understood first as lending at interest itself, then, as the economy became monetized, as excessive and abusive interest. Several councils — Lateran II (1139), Lateran III (1179), Vienne (1311) — legislated against usurers. Doctrine was later nuanced, distinguishing legitimate interest, which remunerates a real risk and a service rendered, from usury properly so called, which exploits the borrower's distress. But the underlying principle remains: money must not devour man. Lending is ordered to the service of one's brother, not to his enslavement.

This theological suspicion illuminates the contemporary Church's sensitivity to international debt: a system in which compound interest turns a development loan into a perpetual chain resembles, on the scale of nations, what tradition called usury.

The birth of modern sovereign debt

Public debt in the modern sense was born with the modern State itself: wars, then great public works, were financed by borrowing. In the 19th and 20th centuries, the colonial powers lent to the territories they dominated; the young States born of decolonization in the 1950s–1970s in turn inherited or contracted debts to build their development. As long as world growth was strong and interest rates low, the edifice held.

The 1982 shock: the "lost decade"

Everything tipped over in the early 1980s. Soaring American interest rates, falling commodity prices and the world slowdown suddenly made debt service unbearable for many countries of the South. On 20 August 1982, Mexico announced it could no longer meet its maturities: this was the official trigger of the Third-World debt crisis^[10]. The shockwave spread across Latin America, then to Africa.

The 1980s became a "lost decade" for Latin America: income per head fell back, countries ended the decade poorer than they had begun it, and the number of people living in poverty rose sharply. It is in this precise context — not in abstraction — that the Church spoke out.

Structural adjustment programmes

To avoid cascading defaults, the IMF and the World Bank granted new loans, but on conditions: the famous structural adjustment programmes (SAPs). In exchange for rescheduling their debt, countries had to drastically cut public spending, devalue, privatize and open their markets. On the budgetary plane the logic was defensible; on the human plane the cost was heavy: cuts in health and education, rising unemployment, abolished food subsidies. The first victims were, once again, the poorest — those very people who had not decided the borrowing. It is this divorce between accounting rigour and justice toward persons that would feed, in the Church as in civil society, the call for another approach.

Far from improvising, the Church approached international debt as a chapter of its social doctrine, in a remarkable continuity from Paul VI to Francis. The timeline below gives its backbone.

Paul VI: "development is the new name for peace"

The great founding act is the encyclical Populorum Progressio of Paul VI (1967), the first encyclical entirely devoted to the development of peoples. It does not yet treat "debt" in the technical sense of 1982, but it lays down the whole framework: the imbalance between rich and poor nations is a question of justice, and world peace depends on it.

"For peace is also the fruit of development: development is the new name for peace." — Paul VI, Populorum Progressio, § 87^[11]

Paul VI sets out a threefold duty of rich nations that would govern all subsequent reflection on debt:

"It is a duty of solidarity; that is, aid that rich nations should give to developing countries; a duty of social justice; that is, the correction of faulty trade relations between strong and weak peoples; a duty of universal charity; that is, the promotion of a more human world for all, where all will have something to give and to receive, without the progress of some being an obstacle to the development of others." — Paul VI, Populorum Progressio, § 48^[12]

These three duties — solidarity, justice, charity — are the matrix of everything the Church would later say on debt: it is not only a matter of almsgiving (charity), but also of repairing unjust economic relations (justice).

The Justice and Peace Commission (1986): an ethics of indebtedness

When the crisis broke out, the Church reacted swiftly. As early as 27 December 1986, the Pontifical Commission for Justice and Peace published a document specifically devoted to debt: At the Service of the Human Community: An Ethical Approach to the International Debt Question^[13]. Signed by Cardinal Roger Etchegaray, it is the first Roman text entirely dedicated to the subject, and it lays down the guiding principle of all the rest: economic structures and financial mechanisms must be ordered to the service of the human person, and not the reverse^[14].

The document articulates six ethical principles: creating new forms of solidarity, accepting the co-responsibility of creditors and debtors, establishing relations of trust, sharing efforts and sacrifices, fostering the participation of all, distinguishing emergency and long-term measures. Above all, it states a moral limit that would become the Church's canonical formula on debt: debt service cannot be ensured at the price of the economic suffocation of a country, and no government can morally impose on its people privations incompatible with human dignity^[15].

Sollicitudo Rei Socialis (1987): capital turned trap

The following year, John Paul II took up the question in his social encyclical Sollicitudo Rei Socialis (30 December 1987), marking the twentieth anniversary of Populorum Progressio. In it he describes with almost economic precision the reversal by which an instrument of development turned into a mechanism of impoverishment:

"The instrument intended to contribute to development has been turned into a mechanism working in the opposite direction. […] Through this mechanism, the means intended for the 'development of peoples' has become a brake upon development and, in some cases, even a factor for accentuating underdevelopment." — Saint John Paul II, Sollicitudo Rei Socialis, § 19^[16]

The diagnosis is implacable: to ensure the service of their debt, debtor countries "find themselves obliged to export the capital which would be necessary for them to increase or even to maintain their standard of living", and can no longer obtain the new financing they need. Capital, meant to irrigate development, has begun to drain it.

Centesimus Annus (1991): "it is not licit to demand…"

It is in Centesimus Annus (1991), an assessment drawn after the fall of communism, that John Paul II formulates the sharpest moral statement. There he holds together both sides of the question — the principle and its limit — in one and the same sentence:

"It is certainly just that debts be paid; but it is not licit to demand or expect payment when the effect would be the imposition of political choices leading to hunger and despair for entire peoples. It is not possible to demand repayment of debts at the cost of unbearable sacrifices." — Saint John Paul II, Centesimus Annus, § 35^[17]

The practical consequence is drawn at once: one must then find "ways of relief, postponement or even extinction of the debt, compatible with the fundamental right of peoples to subsistence and progress"^[18]. The door to cancellation is opened — not as a whim, but as a demand of justice when repayment would kill.

Tertio Millennio Adveniente (1994): the Jubilee as remission

Three years later, John Paul II explicitly links this teaching to the biblical tradition of the jubilee and turns it into a programme for the Year 2000. In the apostolic letter Tertio Millennio Adveniente (1994), he invites the Church to make herself the voice of the poor:

"Thus, in the spirit of the Book of Leviticus (25:8-28), Christians will have to raise their voice for all the poor of the world, proposing the Jubilee as 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." — Saint John Paul II, Tertio Millennio Adveniente, § 51^[19]

For the first time, a pope links the spiritual jubilee — remission of sins, conversion, grace — to the social jubilee — remission of the debts of nations. The gesture is not a metaphor: John Paul II asks Christians to act.

The Compendium (2004): the synthesis in § 450

All this doctrine is finally condensed in the Compendium of the Social Doctrine of the Church (2004), which devotes its paragraph 450 to "Foreign debt". The Compendium recapitulates the balance achieved: recognition of the mingled causes of the crisis, affirmation of the duty to repay, but primacy of the right of peoples to live. It is the reference text today — the one to place at the head of any Catholic exposition of the question^[20].

John Paul II's appeal did not remain a dead letter. The passage to the Year 2000 saw a mobilization of civil society converge with the action of financial institutions, resulting in real, quantifiable debt cancellations.

The "Jubilee 2000" campaign

Directly inspired by the biblical notion of jubilee, the Jubilee 2000 campaign unfolded from the mid-1990s in more than forty countries. Its demand was simple: cancel the unpayable debt of the poorest countries before the Year 2000. Its most spectacular moment was the Birmingham human chain in May 1998, when tens of thousands of people ringed the G7 summit to demand debt cancellation^[21]. Carried by the Churches — Catholic and Protestant — as much as by NGOs, the campaign succeeded in forcing the subject onto the great powers' agenda. In all, the cancellations obtained in its wake are estimated at more than a hundred billion dollars for some thirty of the poorest countries^[22].

The HIPC Initiative (Heavily Indebted Poor Countries)

On the institutional side, the IMF and the World Bank launched as early as 1996 the Heavily Indebted Poor Countries Initiative (HIPC), strengthened in 1999 under pressure from the campaign and the Jubilee^[23]. For the first time, these institutions agreed to reduce multilateral debt — hitherto held untouchable. The mechanism ties relief to commitments to good governance and to redirecting the freed sums toward fighting poverty.

Reading note: these figures are orders of magnitude communicated by the institutions and the campaigns; they give the scale of a real result, without claiming dollar-by-dollar accounting.

The record is real but unfinished. Dozens of countries saw their debt eased and were able to reinvest in health and schools; but over-indebtedness has since reappeared, and the question, far from closed, reopened with the Covid-19 pandemic and its aftermath. The Jubilee of 2025 would confirm it.

Beyond figures and campaigns, the Church's teaching on debt rests on a few principles whose coherence deserves to be brought out.

The co-responsibility of creditors and debtors

The first principle is co-responsibility, laid down by the Justice and Peace Commission as early as 1986. A debt is contracted by two parties: there is a borrower, but also a lender. Yet morality long tended to judge only the debtor. The Church restores the balance: the creditor who lent imprudently, to a corrupt regime, at extortionate rates, or for projects he knew to be hopeless, bears a share of responsibility for the crisis. The just solution therefore cannot lay the whole burden on the debtor alone: according to the Commission, this co-responsibility engages the future of countries and entire populations, down to the conditions of an international peace founded on justice^[27].

Debt service must not "asphyxiate" a people

The second principle is the absolute moral limit: no debt may be exacted to the point of depriving a people of what is necessary. This is the 1986 "asphyxiation" formula, taken up and hardened by Centesimus Annus: it is "not licit" to demand a payment that would drive "entire populations to hunger and despair"^[28]. This principle does not abolish the obligation to pay; it ranks it. Between the creditor's right and the people's right to live, the second prevails, because the life of the person comes before any contract.

Odious debt

A third principle, both legal and moral, clarifies the preceding one: odious debt. Theorized as early as 1927 by the jurist Alexander N. Sack, it denotes a debt contracted by a regime not for the good of the population, but against it — to enrich itself, stay in power or repress — and which the creditor knew to be such^[29]. Sack held that such a debt should not bind the people or the State succeeding the guilty regime. The notion remains debated in international law, but it expresses a powerful moral intuition, convergent with Catholic doctrine: a people cannot be made to pay debts contracted against it by its oppressors. It is the exact legal transposition of the Compendium's words on populations "which bear no responsibility"^[30].

The universal destination of goods as horizon

All these principles are rooted in a single one that towers over them: the universal destination of goods. If the earth and its resources are destined for all, then no financial structure can legitimately organize the lasting transfer of wealth from the poor to the rich. Yet that is exactly what a debt turned into a "mechanism working in the opposite direction" produces: poor countries, through their debt service, finance rich countries. The Church does not demand the abolition of contracts or of property; it demands that international finance be reordered to its end, which is man. It is the same principle that grounds the economy of the gift, the just wage and the critique of the excesses of capitalism.

The Church's teaching on debt meets serious objections, which must be taken seriously rather than brushed aside. Three recur constantly.

"A debt must be paid": the moral-hazard objection

The objection. Cancelling debts, it is said, rewards bad management and encourages irresponsibility: why would a State show prudence if it knows its debts will be wiped out? This is the moral hazard argument. And it carries weight: an automatic, unconditional remission could indeed demoralize public management.

The answer. The Church never proposes unconditional, automatic cancellation. On the contrary, it reaffirms that "a debt that is contracted must be repaid"^[31] and acknowledges the share of internal responsibility — corruption, bad management — in the crisis. What it contests is the absolutization of the principle: it holds as long as it does not kill. The HIPC Initiative itself tied relief to good-governance commitments: remission is not a blank cheque, but an act of justice with conditions attached. Moral hazard is a real management risk; it is no reason to let a people die.

"Cancellation benefits the corrupt, not the poor"

The objection. What is the use of cancelling the debt of a State riddled with corruption, if the freed money ends up in the leaders' pockets rather than in schools? The objection is all the more serious since the Church itself names corruption among the causes of the crisis.

The answer. Precisely because this risk is real, social doctrine insists on participation and transparency: relief must come with mechanisms guaranteeing that the freed sums genuinely serve the population. That is one of the six principles of 1986. Fighting corruption and remitting debt are not opposed: they go together. Refusing all relief on grounds of corruption would punish the people twice — through debt and through their leaders' corruption.

"This is naive charity in the face of hard realpolitik"

The objection. All this would be generous but unrealistic: international finance obeys power relations, not homilies. The Church would be speaking as an otherworldly moralist.

The answer. History refutes the objection. The Jubilee 2000 campaign and the HIPC Initiative really did cancel tens of billions in debt and change the lives of millions: that was no pious wish, but a result. Besides, social doctrine never confused charity with naivety: it distinguishes the duty of solidarity (aid), the duty of justice (repairing distorted economic relations) and the duty of charity^[32]. Demanding justice in international financial relations is not sentimentality: it is requiring that the economy serve man, and not the reverse^[33].

The question is no closed file from the 2000s. It has reopened, with new faces, and Pope Francis made it one of the major themes of the Jubilee of 2025.

The Jubilee of 2025 and Pope Francis's appeal

In the bull of indiction of the Ordinary Jubilee of 2025, Spes Non Confundit (9 May 2024), Francis explicitly takes up John Paul II's gesture and gives it an even sharper formulation:

"I would like to make another pressing appeal […] to the wealthiest nations, […] to 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. This is more a question of justice than of generosity." — Pope Francis, Spes Non Confundit, § 16^[34]

The precision is striking: remitting the debt of the poorest is less a matter of generosity (magnanimity) than of justice. Francis calls for "wiping out unjust and insolvent debts" and "feeding the hungry", rejoining the biblical tradition he himself cites (Lev 25:23).

"Ecological debt"

Francis adds a decisive shift: to the financial debt the South owes the North, he opposes the ecological debt the North owes the South. The idea, already present in Laudato Si' (2015), reverses the perspective:

"There is, in fact, a true 'ecological debt', particularly between the North and the South, connected to commercial imbalances […] as well as to the disproportionate use of natural resources, historically carried out by certain countries." — Pope Francis, Laudato Si', § 51^[35]

And still more directly:

"The foreign debt of poor countries has become a way of controlling them, but this is not the case with ecological debt." — Pope Francis, Laudato Si', § 52^[36]

In other words: if one insists on the language of debt, let it not be forgotten that rich countries are themselves debtors — of an environmental and historical debt. The question of financial debt cannot be isolated from integral ecology and the safeguarding of creation.

Over-indebtedness returns

Finally, the problem itself has reappeared. Successive shocks — the 2008 financial crisis, the Covid-19 pandemic, the rate and inflation rises of the 2020s — have plunged many countries of the South back into over-indebtedness. States are once again devoting to their debt service sums exceeding their health or education budgets. The permanence of the problem confirms that the Church's teaching is no souvenir of the Year 2000, but a grid of discernment still valid today. It is also a field of action for Christians engaged in the city — one of the places where the mission of the laity in the city is concretely exercised.

It would be wrong to read this file as a mere chapter of economic ethics. For the Christian, debt points to a spiritual truth that governs its interpretation. The Lord's Prayer itself places forgiveness under the sign of remitted debt: "forgive us our debts, as we also have forgiven our debtors" (Mt 6:12). We ask God for the remission of a debt — that of sin — which we could never settle by ourselves.

This is the whole meaning of the parable of the unforgiving debtor. The servant to whom the king remits "ten thousand talents" — an astronomical, impossible sum — in turn refuses "a hundred denarii" to his fellow servant. Jesus' teaching is uncompromising: he who has received such a remission and refuses it to another condemns himself^[37]. Yet this is exactly the situation of nations: who among the rich can claim never to have received — in resources, in labour, sometimes plundered from the South — far more than he believes he lent?

"Should not you have had mercy on your fellow servant, as I had mercy on you?" — Gospel according to Saint Matthew 18:33^[38]

The Church's social doctrine on debt is therefore no veneer of morality over economics. It flows from the evangelical logic of forgiveness extended to relations between peoples. The biblical jubilee — remission of debts, liberation of captives, restoration of lands — was already an anticipation of salvation. When Jesus inaugurates his ministry by proclaiming "the acceptable year of the Lord" (Lk 4:19, citing Isaiah), he takes up the vocabulary of jubilee to announce the liberation he brings. Working for the remission of unjust debts is, in its own measure, to prolong this gesture: to let pass into the history of men the forgiveness God, first, grants us.

On the same theme (neighbouring Ignispedia articles): debt belongs to the economic cluster of social doctrine. See The Universal Destination of Goods, The Economy of the Gift, The Just Wage, Poverty, Private Property according to the Church, Capitalism and Its Limits, Economic Liberalism, Globalization, Integral Ecology and Safeguarding Creation.

Principal magisterial sources:

• Paul VI, Populorum Progressio, encyclical letter, 26 March 1967 (full text on vatican.va).
• Pontifical Commission for Justice and Peace, At the Service of the Human Community: An Ethical Approach to the International Debt Question, 27 December 1986 (French ed., Cerf, 1987).
• John Paul II, Sollicitudo Rei Socialis, 30 December 1987, § 19; Centesimus Annus, 1 May 1991, § 35; Tertio Millennio Adveniente, 10 November 1994, §§ 13 and 51.
• Pontifical Council for Justice and Peace, Compendium of the Social Doctrine of the Church, 2004, § 450.
• Francis, Laudato Si', 24 May 2015, §§ 51-52; bull Spes Non Confundit, 9 May 2024, § 16.
• Scripture: Leviticus 25:8-28; Deuteronomy 15:1-2; Nehemiah 5; Matthew 6:12; Matthew 18:23-35; Luke 4:16-21.