Cutting debt servicing costs for the world’s poorest countries could free up $900bn (£660bn) a year for development, according to a new report to the UN secretary general. The analysis, prepared by Development Finance International (DFI) and launched in Oslo, warns that the world is facing “the worst ever debt-provoked development crisis”.
The G77 developing countries spend a total of $8tn a year servicing their debts, equating to an average of 35% of government spending. Six billion people live in countries where debt service exceeds annual health budgets. The UN secretary general, António Guterres, has called for global action on debt relief to free up resources for sustainable development goals.
The report models the benefits of halving borrowing costs for the 33 countries paying the highest interest rates, plus reducing repayments to 10% of government revenue for others. This could free up as much as $3tn a year. A more realistic plan, excluding wealthier developing countries like China, could still free up $917bn a year, allowing countries to more than double social spending.
The UK chairs the G20 next year, and campaigners urge Labour to seize the opportunity to reduce debt. The burden on developing countries now exceeds that before the 2005 Make Poverty History campaign. The IMF warns that private sector lending, including from hedge funds, increases risks of higher interest rates and currency shocks.
Max Lawson of Oxfam said: “Why should paying debts to rich bankers be more important than feeding hungry people or getting kids in school? Global south governments need massive debt relief and they need it now.”
