Poor countries are trapped in foreign debt
Low-income countries will face their biggest foreign debt bills in 25 years this year. This can put countries’ health and education expenditures at risk.
By 2023, foreign public debt payments for the world’s 91 poorest countries amount to an average of 16 percent of government revenue, according to a study published today by a campaign called Debt Justice. This is the highest level since 1998.
HIGH INTERESTS INCREASED DEBT COSTS
The high debt levels were due to interest rate increases by central banks due to high inflation. Higher interest rates have increased global borrowing costs. This increased the countries’ external debt burden.
Furthermore, most of the 91 countries classified as low- and lower-middle-income by the IMF and the World Bank have high levels of domestic debt. The high level of domestic debt has made the overall debt burden much higher.
REACHED THE CRISIS LEVEL
Heidi Chow, chief executive of Debt Justice, said refunds had reached “crisis” levels for many governments, reducing their ability to deliver public services, address the climate crisis and respond to economic turmoil.
Chow called for action, including amendments to the laws governing bond contracts in the UK and the US, to force private creditors to write off debt. Chow said “swift and comprehensive” foreign debt relief is needed.
SRI LANKA IS IN DEBIT
Considering the debtor countries, it was seen that the countries of South Asia and Africa took the lead.
Sri Lanka is facing a foreign debt repayment program that accounted for 75 percent of government revenue this year, according to World Bank data analyzed by Debt Justice. The country stopped paying its external debt last year. This year, it is believed that the South Asian country will be unable to pay its debts.
Sri Lanka’s internal debt payments are even higher. These debts amount to 27 percent of gross domestic product in 2023, according to an IMF report released last month. According to the IMF, this figure is almost three times the foreign debt.
DEBT COUNTRIES
Zambia and Ghana, which were unable to service their external debts in 2020 and 2021, also have high internal debt.
According to the report, the risk of default is also high in Pakistan. The country’s external public debt is equivalent to 47 percent of government revenue. The government’s external debt is equal to 28 percent of GDP, and internal debt is equal to 37 percent of GDP, according to an IMF report released in September.