A COMMITTEE of MPs has called on the Government urgently to relieve debts of the world’s poorest countries. It has been backed by Christian Aid, which says that the current crisis risks reversing “decades of progress on tackling poverty”.
The International Development Committee’s report Debt Relief in Low-Income Countries, published last Friday, urges: “The combined effects of the Covid-19 pandemic, Russia’s invasion of Ukraine, and global inflation have placed low-income countries’ public finances under extreme pressure, and the situation continues to deteriorate.
“Every dollar spent by low-income countries on servicing unsustainable debt is a dollar not spent on providing basic healthcare, educating girls or tackling climate change. By diverting money away from vital public services, the opportunity cost of servicing unsustainable public debt can be devastating, and it can also undermine the effectiveness of UK aid.”
Despite a series of high-profile debt-cancellation campaigns over the past 30 years, beginning with “Drop the Debt” in the 1990s, many poorer countries are still struggling with international debt, the report finds. Debt burdens, which had been falling until 2010, are now rising sharply.
“Low-income countries are spending more on debt servicing as a proportion of GNI (Gross National Income) than at any point in at least the past 30 years.”
Christian Aid’s chief of UK advocacy and policy, Sophie Powell, said that, in human and environmental terms, spiralling debt could have a “catastrophic impact”.
Kenya, she said, was currently experiencing its worst economic crisis in decades (News, 22 July 2022). “This was triggered by the pandemic, locust infestations, and ongoing climate crises, yet Kenya is forced to spend five times as much on debt repayments than on health.
“The debt crisis affecting more than 50 countries is creating a perfect storm, undermining scope for global South governments to invest in basic services like health care, or action to address the climate crisis, risking setting back decades of progress in tackling poverty.”
On public debt, the report also calls for greater transparency, which, it says, would be good for both creditors and debtors. “The UK should use its membership of the G20 to secure commitments on publishing details of all official overseas lending on a quarterly basis from other G20 Member States.”
A global effort to deliver effective debt-relief, involving not only official bilateral creditors and multilateral institutions, but the private sector, is also needed, the report says. “Robust measures are necessary to facilitate the participation of all creditors. The UK is uniquely placed to tackle these issues, because of its international influence, its legal system and its track record of promoting positive change.”
The report says that the UK can help by creating an effective debt-relief system, and supporting low-income countries in putting their finances on a sustainable footing. Without the expenditure of large sums, this would have an impact on the development of low-income countries.
The report continues: “We urge the UK Government to unclog the international gears of debt relief by demonstrating global leadership and by adopting an interventionist, legislative approach to incentivise and/or compel all creditors, including the private sector, to participate in debt relief.”
Ms Powell agreed that efforts to provide debt-relief had been blocked by some private creditors, such as Blackrock. “The UK Government has the power to take concrete action to make a difference by enacting legislation to compel all creditors, including the private sector, to participate in debt-relief.”
The Government has two months to respond to the report and its recommendations.