More than 100 countries face spending cuts as Covid deepens debt crisis, report warns | Global development
More than 100 countries face cuts in public spending on health, education and social protection as the Covid-19 pandemic worsens already high debt levels, according to a new report.
The International Monetary Fund estimates that 35 to 40 countries are “Past due debts” – defined as when a country experiences difficulties in servicing its debt, for example when there are arrears or debt restructuring.
However, this figure is a “gross understatement”, according to the to study, led by the Pioneers for peaceful, just and inclusive societies, based at the Center for International Cooperation at New York University.
The unsustainable rise in debt has led to widening inequalities between high-income countries and those in the south of the world, researchers said.
“We have compiled a list of countries labeled as being in debt distress according to a number of criteria, and estimate that around 100 countries will need to reduce their budget deficits during this period, although the majority are still facing the third or in the fourth wave of the crisis. [Covid-19] pandemic, ”the report says.
“In addition, the possibility of canceling this debt is complicated because many of these countries have contracted debts on non-concessional terms with private lenders. Trends in [the UN’s] Financing for Development (FFD) was totally insufficient to achieve the SDGs [sustainable development goals] even before the Covid-19. Now there is a full-blown crisis. “
Countries falling into debt are Tunisia, which has seen political upheaval, as well as Zambia and Ghana, said Faiza Shaheen, lead author of the report, which is launched to coincide with a meeting of the General Assembly of Nations. United World Leaders Thursday.
Zambia was the first African country to default on debt last year during the pandemic and must now allocate 44% of its annual government revenue to creditors, Shaheen said. Ghana spends around 37% of its national budget on paying interest on debt.
In 2019, the cost of servicing external debt in 64 countries exceeded what they spent on health care, she said. Cameroon devoted 23.8% of its budget to debt payment, against 3.9% of the country’s income devoted to health.
The researchers used various indicators to identify countries deemed vulnerable due to rising debt levels, including their debt-to-GDP ratio, debt-to-exports ratio, as well as countries considered to be fiscally vulnerable by the government. United Nations Development Program. The country’s credit rating and growth path were compared to the debt service burden.
“The Covid-19 pandemic has led to a debt distress crisis that has been brewing since the aftermath of the 2008 global recession,” Shaheen said.
“The situation is made worse by the fact that poor and middle-income countries are taking more debt to buy vaccines, or have to rely on the UN Covax, which promises only 20% of the vaccine coverage of here the end of the year, ”she said.
“The dynamics of global debt, which means rich countries can borrow cheaply and use huge fiscal stimulus packages while low- and middle-income countries need to cut, means global inequalities are likely to widen. . “
Shaheen said richer countries spent an average of around 6.5% of GDP on the Covid-19 fiscal stimulus, almost double the 3.3% of GDP spent by countries at risk of fiscal consolidation brutal, defined as when government policies focus on reducing deficits and debt, for example through austerity measures.
“We’ve heard a lot about the ‘build back better’ rhetoric, but of course these countries don’t have the money to do it; they don’t have it in terms of borrowing and indebtedness, and they also often have a low tax base.
The researchers interviewed people in eight countries about their concerns about inequalities and the political priorities of their governments.
“We’ve talked to people all over the world, and the poll clearly shows that people don’t want their governments to cut – they want their governments to spend more,” Shaheen said.
“If nothing changes and governments have to make cuts, people will see development stop and even reverse. For the person on the street, this means that they will visibly see that it is more difficult to access key services and that they will not see any improvement in their material well-being.