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British public backs cancellation of African debt

17 May 2024

Alamy

Men transport their belongings, salvaged from floods, in Chiradzulu, southern Malawi, in 2023. African countries spent far more on debt that year than climate solutions, education, and health

Men transport their belongings, salvaged from floods, in Chiradzulu, southern Malawi, in 2023. African countries spent far more on debt that year than...

MOST people in Britain believe that it is “absurd” that African governments spent £67 billion on external debt payments last year — 50 times more than the entire UK aid budget for the Continent in 2023, new research from Christian Aid suggests.

In 2024, African governments are expected to spend £82 billion on external debt repayments.

Debt relief for low-income countries is urgently needed, the charity’s report Between Life and Debt, published on Thursday, says. The UK has a moral and historic responsibility to lead efforts to resolve the crisis, it says.

The report is supported by a former Prime Minister, Gordon Brown, who led global debt-relief efforts in the 2000s. He writes in a foreword: “The scale of this inequality between Africans and the rest of the world is so great that I’m not sure the world will ever forgive us for failing to deliver urgent debt restructuring.

“In many African countries, more money is being spent on debt payments than on health or education, and so debt restructuring is indeed a matter of life and death.”

The Christian Aid report includes statistics from, among other sources, the International Monetary Fund (IMF), which found that African countries struggled to pay external debts that had reached a figure higher than between 14 and 23 per cent of government revenue. In 2024, 28 African countries will be in this bracket, the IMF says, with 23 of these paying more than 20 per cent of government revenue (compared with zero in 2010).

Sudan, where millions are facing acute hunger, spends ten times more on external-debt servicing than on health care. In Malawi, where just 15 per cent of children complete secondary school, twice as much is spent on debt as on education.

Christian Aid warns that, if the debt crisis is not solved, the Sustainable Development Goals will never be reached. Its report calls for urgent action to cancel the debts; to introduce legislation to ensure that private lenders play their part; to build a debt system that delivers relief; and to support policies to transform the global economic system to help keep resources within low income countries.

An online Savanta opinion poll of 2148 UK adults conducted in April for Christian Aid is published alongside the report. It found that a high proportion (62 per cent) of respondents considered it wrong that more than half of the countries of Africa (34) spent more money repaying external debt than on health, education, or combating the climate crisis.

More than half of respondents (57 per cent) considered it “absurd” that, in 2023, African countries spent 50 times more money on external debt than the entire UK aid budget for the year (£1.2 billion).

Just under half (48 per cent) believed that the UK Government should introduce legislation to ensure that private lenders play their part in cancelling debt; 45 per cent that the UK should wipe the debts of lower income countries.

“Decades after independence, many African countries are trapped in a debt crisis which is not of their making,” Christian Aid’s head of UK advocacy and campaigns, and author of the report, Jennifer Larbie, said on Thursday.

“With no way out, rather than building hospitals and schools and training doctors and teachers, they have no option but to line the pockets of predatory private creditors.” She described the creation of a fairer system as “a question of economic and social justice”.

The report charts the development of the current debt crisis, which, it says, stems from the 2008 global financial crash. Lenders such as commercial banks, investment firms, and hedge funds, hugely increased their lending to developing countries in search of profits when interest rates in the global North were low.

But the roots lie in the 1980s, it says, when the response of multilateral lenders, such as the IMF and the World Bank, was not to cancel debt but to lend more money, “effectively bailing out private lenders”.

Today, the World Bank reports that 40 per cent of African external debt is owed to private creditors (who charge the highest interest rates, 6.2 per cent); 39 per cent to multilateral lenders; and 21 per cent to bilateral creditors.

Christian Aid says that the past few years of global crises have compounded already untenable debts. During the pandemic, private creditors stopped lending, and, without new loans, governments of low-income countries struggled to pay.

In September 2023, the Bogota Declaration united experts from around the global South, who demanded “cancellation of all unsustainable and illegitimate debts from all creditors”. It stated: “The heaviest impacts are borne by millions of working people, particularly women. . . The debt crisis is intertwined with, and compounds, the multiple crises, with the climate emergency threatening the survival of the planet and humanity.”

Debt servicing is pushing aside key spending needed to confront the climate and environmental crises, the report says. African people are “at the front line of a climate crisis they did little to contribute to. People living in poverty are disproportionately vulnerable because they lack the resources to buy goods and services to buffer themselves and recover from the worst effects of the changing climate.”

The report concludes that a full renegotiation of the structures of the global economic system is required to facilitate the redirection of resources back to the African continent and its access to consistent, adequate financing.

It acknowledges that this would be “going far beyond what even the most generous aid budgets can offer, and redesigning the system so that low income governments can make their own decisions and retain, raise, and spend resources in ways that reduce poverty and inequalities.

“Cancelling debt is one of many starting points to reforming the system.”

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