Poor Nations Will suffer most over COVID-19 debt crisis
The coronavirus pandemic has seen many developing countries build up large debts, which debt-relief campaigners say undermines their ability to provide basic services such as health care and education.
In an interview with VOA, Rebeca Grynspan, secretary-general of the U.N. Conference on Trade and Development (UNCTAD), said that debt levels were already high before the pandemic but that the situation had worsened rapidly.
“You have them building up their debt, and their export earnings not being enough to pay for their debt load. So this situation is really dramatic already for many of these countries,” Grynspan said.
Sri Lanka’s golden beaches and tropical jungles normally attract millions of tourists every year. The pandemic cut off that source of income while successive global lockdowns disrupted trade. Sovereign bond ratings have been downgraded, and economists fear it could be the next country to default.
The coronavirus pandemic has driven total global debt to its highest level in more than half a century, according to the World Bank. Lebanon, Suriname, Venezuela and Zambia have already defaulted on their sovereign debt.
Figures from the International Monetary Fund show Ethiopia, Tunisia, Argentina, El Salvador, Ghana, Republic of Congo, Tajikistan and Mozambique are also at high risk of being unable to pay their debts.
Eric LeCompte, executive director of the Jubilee USA Network, which campaigns for debt relief for poorer nations, said creditors must act now.
“The G-20 needs to offer speedy and deep debt relief and compel private creditors to match it. History teaches us that the longer we wait to address a debt crisis, the more difficult it becomes to solve the crisis,” he wrote in an email.
Many developing nations took out loans during the pandemic. They now face big repayments, estimated by the World Bank at $35 billion in 2022 — an increase of 45% from the previous year, with almost half of that owed to China. Meanwhile, economic growth forecasts have been cut. Last month, the International Monetary Fund said global growth is expected to slow to 4.4% in 2022, down from 5.9% last year.
“For the first time, the rate of growth of the developing countries is less than the rate of growth of the developed countries, so in terms of the sustainability of this debt burden, we have where we are in a very high-risk space,” Grynspan told VOA.