Figures released by the World Bank have revealed that lending to low income country governments is booming, increasing by 30 per cent in just one year. Almost half of the loans have come from just two institutions, the World Bank and IMF. Campaigners have raised concerns that these loans from the World Bank and IMF, which are officially counted as ‘aid’, could be contributing to the creation of new debt crises in developing countries.
Foreign loans to low income countries totalled $11.8 billion in 2012, up from $5.8 billion in 2007, and $9.2 billion in 2011. Over the last five years, 45 per cent of loans to low income countries have come from the World Bank and IMF. Many low income countries have previously had substantial debt relief following global campaigning for the cancellation or repudiation of unjust and unsustainable debts.
The rise in lending is due to an increase in aid money being used for loans through institutions such as the World Bank, loans from new lenders such as China, and the availability of cheap money in the western world due to quantitative easing and low interest rates.
Sarah-Jayne Clifton, Director of Jubilee Debt Campaign said:
“Many low income countries have benefited from debt cancellation in the last decade, but the current boom in lending could be creating new unsustainable debts. The unregulated global financial system is still encouraging a boom-bust cycle of lending and crisis, which is exacerbated by the large amounts of ‘aid’ money which is actually given as loans.”
The figures do not include the foreign debts of banks and companies, which have been the cause of debt crises in countries such as Ireland and Spain in recent years, and in East Asia in the 1990s. Neither do they include debt payments hidden within public private partnerships.
The figures released by the World Bank also show that debt payments made by low income countries increased to $4.8 billion in 2012, up by almost 40% from $3.5 billion in 2011.
Tanzania qualified for some debt cancellation in 2001 and 2005. Government foreign debt payments fell from 9 per cent of government revenue in 2000 to 1 per cent between 2007 and 2011. However, the government’s total foreign owed debt has increased from $2.5 billion in 2006 to $7.4 billion in 2012. Debt payments are predicted to reach 9 per cent of government revenue by 2017, assuming economic growth of 7 per cent a year. 68% of loans to Tanzania in the last five years have been from the IMF and World Bank.
Mozambique qualified for debt cancellation in 2001 and 2005. Debt payments fell from 12 per cent of government revenue in 1998 to a low of 2 per cent in 2007. Public expenditure on health and education increased from 30 per cent of government revenue in 1998-1999 to 36 per cent by 2005-2006.
The government’s foreign owed debt has now increased to $4.2 billion. The IMF and World Bank predict that by 2017 debt payments will be 9 per cent of government revenue a year. This assumes economic growth of 8 per cent a year. The IMF and World Bank are responsible for 47 per cent of lending to Mozambique in the last five years.
The Mozambique economy has doubled in per person terms between 1998 and 2010. Yet the number of people living on less than $2 a day actually increased from 15.2 million in 1996 to 18.3 million in 2008 (the latest year for which there are figures).
 The figures are calculated from World Bank. World Development Indicators database.
 Low income countries are those with a national income of less than $1,035 per person (£630). There are 36 low income countries: Afghanistan, Bangladesh, Benin, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, Comoros, Dem. Rep. of the Congo, Eritrea, Ethiopia, The Gambia, Guinea, Guinea-Bissau, Haiti, Kenya, Dem. Rep. of Korea, Kyrgyz Republic, Liberia, Madagascar, Malawi, Mali, Mozambique, Burma, Nepal, Niger, Rwanda, Sierra Leone, Somalia, South Sudan, Tajikistan, Tanzania, Togo, Uganda, Zimbabwe.
 35 countries have had $130 billion of debt cancelled between 2000 and 2012 under the Heavily Indebted Poor Countries initiative. Many are in the list of low income countries, though some such as Bolivia and Zambia are now counted as ‘lower middle income countries’.