The world’s poorest countries are facing an unprecedented debt crisis
The pandemic has caused a collapse in tourist and service industry revenue
The World Bank reported this week on the looming debt crisis for Low-Income Countries (LICs). LICs face a $10.9 billion increase in debt repayments, following the economic crisis that has accompanied the Covid-19 pandemic. The report stated that LICs must repay an estimated $35bn to official bilateral and private-sector lenders during 2022, a 45% increase from 2020.
The debt crisis has long been predicted. The collapse in tourism and revenues from the service sector caused by the pandemic hit poor countries more than most. Stalked by the fear of downgrades in their credit-ratings and higher borrowing costs, many LICs were reluctant to adopt the Covid loans offered by multilateral lending institutions. Debt suspension initiatives sought to postpone about $20bn owed by 73 countries to bilateral lenders between May and December 2020. Yet in the end, just 42 countries received relief totalling $12.7bn.
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As borrowing costs impact the ability of countries to secure basic goods and services, the impact on daily life is immense. Talk of unsustainable increases in the cost of basic foods is rife in poor countries; while there has been much discussion of the cost-of-living crisis in Western countries, it is the Global Poor who will suffer the most in 2022.
The impact of this crisis is being felt everywhere. In Sri Lanka, a report last week suggested that half a million people had sunk into poverty, while in Ghana, an economist warned that the country’s economy was on the brink of collapse. In Nigeria, meanwhile, there has been a huge spike in the cost of basic foods thanks to a tripling of the country’s debt since President Buhari took office in 2015.
While there’s no doubt that the levels of debt were already concerning prior to 2020, the response to the pandemic has pushed things to breaking point. Hunger, protest, and associated assaults on public health are likely outcomes. Indeed, this has already begun; as one commentator put it, the past two years of public health policy in Africa having “centred on reducing healthcare access, reducing services for pregnant women and children, and promotion of malnutrition”.
What can be done to address this? In the long-term, developing local credit systems which bypass global institutions is a necessary step. In the short term, in a context where the wealth of the world’s ten richest men has doubled over the past two years, a global wealth tax on pandemic profits must be considered — at the very least, ignoring their policy advice may be the best place to start reversing the appalling explosion of inequalities which has taken place at the same time.
Toby Green’s book The Covid Consensus: The New Politics of Global Inequality is published by Hurst.
Something for The Guardian readers to read…. Something needs to penetrate the fantasy that measures employed have been moral and good.
You’re right – sadly I’ve tried to convince Guardian readers of this and even recommended Toby’s book to my labour MP to open his eyes.
However, their response tends to be three fold; either they don’t believe it, they deflect blame on to poorly managed African governments or they do the classic ‘it would be over sooner if we’d locked down earlier’.
Lockdown and Covid restrictions have become articles of a dishonourable faith now for the left – using any tactic is limited in countering it.
Well, maybe point out to them that regardless of what caused poverty in Africa – be it colonialism, poor management or both, fact is that the lockdowns have pushed them far further over the edge. Their lockdown policies (amongst some other things) are going to contribute to most of Africa eventually trying to move in with them.
In my understanding Covid would be a breeze of a problem compared to what comes next. We have spend trillions & saved the vulnerable in the rich countries, closed borders and put the world to a stand still so something/someone must give. The poor countries will have to give even more. The resources are finite and wealth generally has movement in both directions but because of worldwide, intense interference this movement is often been in one direction, from the poor to the rich and has become even faster in the last 2 yrs in that direction.
The deaths and misery of covid will now be shifted to the poor but not because of the disease itself but because of our Covid policies. It’s natures rule.
If rich countries interfered in nature to produce a deadly/ scary version of covid, which escaped /released from labs, that caused some of our most vulnerable in rich countries to die, we should have taken the pain. It was our error. But to avoid that we closed up the world and made policies that will now have a tsunami effect on the most vulnerable countries , in their most vulnerable populations.
So you can’t save people by making such policies, you can just shift the pain elsewhere.
‘in a context where the wealth of the world’s ten richest men has doubled over the past two years,’ And how have Africa’s richest families fared over this period? The dos Santos, Dangotes, Ibrus, Kenyattas, Bakhresas, Nguemas, Kagame, and the others?
It is marvellous that Unherd publishes articles by Professor Green. I have read two of his books – The Rise of the Trans-Atlantic Slave Trade and A Fistful of Shells. Both are drenched in Critical Theory/Marxism. To my mind, the first is wonderful, the second much less so. The first has the merit of paying particular attention to the detail/evidence (and references inter alia what appears to be a wonderful oral history collection in The Gambia: https://ncac.gm/oralarchieve/) so that the CT/Marxist framing doesn’t matter. The second book just seems to be engulfed by that CT/Marxist framing. I say marvellous as I understand the whole purpose of Unherd to be to provide a platform for any intelligent, respectful and discordant voice.
The new super wealthy have doubled in wealth – the estimate is an increase of $2.1 Trillion to 5$ Trillion in 2 years – (error margin of 2.9$ trillion – so no one knows how badly they raped the planet)
You need to watch some Rebel Capitalist – George Gammon, youtube https://www.youtube.com/watch?v=kVKx7pe-6jE
He says what everyone Must know if they watched the world….
The IMF used this inevitable $ debt crunch coming in developing world to FORCE VACCINE MANDATES ON THEM. IMF, (WEF< WHO< Davos) See, the IMF is the stick of the Global Elites, and told all the debted world -” You Will Lock Down, even though it destroys your economy – or you will not get $ loans when you need them to survive the coming crunch.”
These global lockdowns were to destroy the global economy NOT for health – watch how it plays out – no developing world country would want to lock down – they were forced to – to push the Vax Mandate, and so all the $$$ to the super wealthy – and to increase their power 100X.
The lockdowns in the developed world will cause millions in the developing and third world to starve from reduced economic activity as well, and billions to slide into poverty – something I had said for 2 years now…. The Plandemic is going to plan….
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