Pressure increases for debt relief for developing countries in the face of coronavirus | Mondial economy
Calls for a comprehensive debt relief program to help poor countries cope with the coronavirus pandemic have intensified after research shows more than 60 countries are spending more to pay their creditors than they are. do for health.
Ahead of a series of key meetings this week, the Jubilee Debt Campaign said it was vital to ease the growing financial pressure on poor countries by canceling their debt payments this year.
The JDC said that among the 121 low- and middle-income countries for which 2019 data was available, an average of 10.7% of government revenue was spent on public health systems, compared to 12.2% on debt payment exterior.
Of the 121 countries, 64 spent more on debt service than on public health. The JDC said there was already pressure on the budgets of poor countries even before the economic shock of Covid-19, which had resulted in falling commodity prices, huge capital flight, rising costs of future borrowing and loss of income by other means. such as remittances.
Many countries in Africa, Latin America, and some countries in the Middle East typically pay more than 10% interest on their loans, while richer countries may pay 1% or less.
Sarah-Jayne Clifton, Director of the JDC, said: “In the face of a medical emergency of the magnitude of Covid-19, it is indefensible that poor countries will have to spend more money on debt payment than on debt. Healthcare. Before this crisis hit, 64 of the poorest countries were already spending more on external debt payments than on their public health systems.
“We need urgent action from the international community to cancel debt payments from developing countries in 2020. This is the fastest way to help deliver the funding that is desperately needed to strengthen systems. of public health in the face of this unprecedented global crisis. “
The 10 countries with the largest difference between the proportion of government revenue spent on health care and the payment of external debt were Angola, Sri Lanka, Gambia, Republic of Congo, Ghana, Zambia, Laos, Lebanon, Pakistan and Cameroon. All of them spent more than 20% of public revenues on the payment of external debt in 2019.
The most likely outcome would be a suspension of debt payments to other governments this year for the 76 countries classified as low income by the World Bank because they are eligible for grants and soft loans under its mechanism of the International Development Association (IDA).
However, a coalition of 200 charities and campaign groups is pushing to include the IMF, World Bank and private sector creditors in any deal.
By 2020, the 76 IDA countries are expected to spend at least $ 18.1 billion (£ 14.2 billion) to repay debt to other governments, $ 12.4 billion to multilateral institutions and 10 , $ 1 billion to external private creditors.
The IMF and the World Bank have published a joint statement last month, calling on bilateral creditors to suspend debt payments from IDA countries this year. The two organizations fear that the double impact of a simultaneous health and economic emergency will put impossible financial pressures on poor countries and precipitate a new debt crisis.