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Impoverished countries spending up to 40% of government revenues on repaying debt, according to new research

  • Poor countries around the world are cutting public services such as health and education as the cost of debt rises 
  • Cuts put women’s rights and advances in gender equality at risk 
Thursday February 20 2020 

A report published today shows that rapidly rising and more expensive public debt is pitting the rights of creditors against those of the world’s poorest - and in particular women and girls - as countries devote up to 40 per cent of revenue to external debt service.

The new research - published by the European Network on Debt and Development (Eurodad) to mark World Day of Social Justice - shows that in at least one of the years between 2014 and 2018, at least 20 governments in the global south spent more than one-fifth of revenue on servicing external debts. This exceeded more than 40 per cent in six countries, including Lebanon, which has been going through a financial and debt crisis and which last week called in the IMF for advice on dealing with debt payments. The other countries are Angola, Djibouti, Jamaica, Sri Lanka and Ukraine. 

The impact of the growing debt burden is also already playing out in cuts to health and education spending in many affected countries, with the latest available World Bank data showing drops in education spending in relation to GDP in 21 low- and middle-income countries between 2015-17, while debt service indicators increased. 

Similarly, in the 39 developing countries, among those where data is available, health expenditure per capita decreased between 2014 and 2016, while debt repayments rose.

Iolanda Fresnillo, author of the report - titled Out of Service – How public services and human rights are being threatened by the growing global debt crisis - said: “Accessing education and health services are basic human rights and yet they are being threatened because of a growing global debt crisis. Cuts to these public services are affecting women in particular, as they bear the burden of unpaid care work, which is increased when services are cut.”

The report also outlines how: 
  • Between 2010 and 2018, external debt payments as a percentage of government revenue grew by 83 per cent in low- and middle-income countries, from an average of 6.71 per cent in 2010 to an average of 12.56 per cent in 2018. 
  • In Sub-Saharan Africa, the proportion of government revenue destined for external debt service payments more than doubled, from 4.56 per cent in 2010 to 10.8 per cent in 2018. 
Under international human rights law, states have a duty to promote social progress and better standards of living, including by allocating sufficient resources to public service provision. Yet as another global debt wave unfurls, public services are under threat from both a diversion of government resources towards international creditors, and through direct, austerity-driven cuts.

The report shows how: 
  • Between 2014-18 government expenditure dropped by more than 18 per cent in Latin America and the Caribbean and by 15 per cent in Sub-Saharan Africa. Looking ahead, the International Monetary Fund (IMF) predicts that this trend will continue in all regions. 
  • According to these projections, government spending in Sub-Saharan Africa will reach a historic low in 2024, at 20.74 per cent of GDP. In Latin America and the Caribbean spending is projected to fall from 33.74 per cent in 2014 to 29.85 per cent of GDP in 2024.  In the Middle East and Central Asia from 32.96 per cent in 2014 to 29.82 per cent in 2024. Meanwhile the IMF predicts debt levels will continue to increase.
Fresnillo said: “The current system of IMF loan conditionalities and other austerity-related measures are forcing governments to choose between repaying debt and paying for hospitals, schools and infrastructure. As a result, fewer and fewer resources are being allocated to public services.”

The report reflects on how:
  • It is mainly women who carry the extra unpaid burden of the care tasks that public services stop providing. 
  • Women are more affected by cuts in healthcare and social protection programmes, reduction of food or energy subsidies and by the removal of vital services for survivors of gender violence. Girls are most affected by cuts in education. 
  • Public workers’ wage caps directly impact women’s income and economic security, as the public sector tends to be a major source of employment for women.
“Today, the world marks World Day of Social Justice, when the pursuit of development, gender equality and human rights should be at the forefront of our minds. Yet people living in some of the world’s most impoverished countries are seeing their rights eroded on a daily basis because there is no fair international system addressing the growing debt crisis.”

Eurodad is calling for a new approach from governments and international financial institutions to dealing with sovereign debt. This includes a more adequate concept of debt sustainability that considers human rights, climate vulnerability and gender equality concerns, progressing towards a multilateral sovereign debt workout mechanism to ensure timely and equitable crisis resolution. The report also calls on governments to respect their international commitments on gender equality and women’s rights, such as those included in the Beijing Declaration and Platform for Action, the 25th anniversary of which falls in 2020.


ENDS

To read the full report go to: eurodad.org/outofservice 
To read a briefing on the report go to: eurodad.org/outofservice_briefing 

Media contact: Julia Ravenscroft: jravenscroft@eurodad.org / +32 486356814