Poor countries are in foreign debt

The ratio of debt burden to government revenues in poor countries is at the highest level in the last 25 years. Borrowing costs of poor countries are rising due to rising interest rates last year.

Low-income countries will face their biggest external debt bills in 25 years this year. This may put countries’ health and education expenditures at risk.

According to a study published today by a campaign called Debt Justice, repayments of external public debt of the world’s 91 poorest countries account for an average of 16 percent of government revenues in 2023. This is the highest level since 1998.

HIGH INTERESTS INCREASED DEBT COSTS

High debt levels resulted from interest rate hikes by central banks due to high inflation. Higher interest rates have escalated global borrowing costs. This increased the external debt burden of the countries.

In addition, the IMF and World Most of the 91 countries classified as low- and lower-middle-income by the bank also have high levels of domestic debt. The high level of domestic debt has made the overall debt burden much greater.

REACHED THE CRISIS LEVEL

Heidi Chow, executive director of Debt Justice, said repayments had reached ‘crisis’ levels for many governments, reducing their ability to provide public services, tackle the climate crisis and respond to economic turmoil.

Chow to force private creditors to cancel debt England And USAHe called for action, including changes to the laws governing bond contracts in Turkey. Chow said “rapid and comprehensive” relief from foreign debt is needed.

SRI LANKA IS IN DEBIT

Considering the debtor countries, it was seen that South Asian and African countries took the lead.

Sri Lanka faces an external debt repayment program that has accounted for 75 percent of government revenues this year, according to World Bank data analyzed by Debt Justice. The country defaulted on its foreign debt last year. This year, the South Asian country is thought to be unable to pay its debts.

Sri Lanka’s domestic debt repayments are even greater. These debts amount to 27 percent of gross domestic product in 2023, according to an IMF report released last month. According to the IMF, this figure is almost three times the external debt.

DEBT COUNTRIES

Zambia and Ghana, which could not pay their foreign debts in 2020 and 2021, also have high domestic debt.

According to the report, the risk of default is also high in Pakistan. The country’s external public debt is equivalent to 47 percent of government revenues. External government debt is equal to 28 percent of GDP, and domestic debt is equal to 37 percent of GDP, according to an IMF report released in September.

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