Poor countries forced to cut public spending to pay debts, campaigners say | Economy
The lack of an effective debt relief program is forcing some of the world’s poorest countries to cut public spending to keep repaying their creditors, a study finds.
A report by Debt Justice indicates that the most indebted countries are expected to cut public spending by an average of 3% between 2019 and 2023 despite the need to counter the impact of soaring food and energy prices.
Using International Monetary Fund data on debt and government spending, the campaign group said the disparity between countries with high and low debt underscores the need for more comprehensive relief. Low-debt countries will increase their spending by an average of 14% between 2019 and 2023.
The report is released to coincide with an investigation this week by the House of Commons International Development Select Committee into the debt crisis in low-income countries, which has both the IMF and World Bank worried. Debt Justice – formerly Jubilee Debt Campaign – said Britain should use its power to entice private lenders to participate in debt relief.
The group’s senior policy officer, Tess Woolfenden, said: “Low-income countries are being forced to prioritize debt payments over public spending on health or food access, just at a moment’s notice. where the expenses are so urgent.”
In the early stages of the Covid-19 pandemic in 2020, the G20 agreed on a common debt treatment framework, but no country has yet received relief through this program, in part. due to opposition from private lenders.
Noting that 90% of the bonds of countries eligible for the G20 debt relief program were governed by English law, Woolfenden said: “The UK must act to ensure that private lenders participate in debt relief . Debt repayments to wealthy lenders must not take precedence over people’s needs in times of multiple crises. »
Debt Justice identifies Sierra Leone as one of the countries forced to divert resources from public spending to debt payment. It says the country’s heavy debt burden was created during the Ebola crisis in 2014 and 2015, but increased due to the pandemic. The IMF expects real government spending per person in 2023 to be 20% lower than in 2015 and 4% lower than in 2019. This low level of spending is then expected to be maintained until at least 2025, according to Debt Justice.
Abu Bakarr Kamara, the Budget Advocacy Network Coordinator in Sierra Leone said, “With Ebola and Covid-19, Sierra Leone has faced two major health crises in recent years, which have collapsed the health sector and the economy. Yet debt repayment absorbs vital resources for the recovery.
“Sierra Leone’s debt cancellation is a critical tool to help the government increase its fiscal space to invest in the health sector in a transparent and accountable manner.”