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Collapse in commodity prices leads to $61 billion funding gap for impoverished countries

  • Amount is $13 billion more than countries studied receive in aid each year

Impoverished country governments could be up-to $61 billion worse off in 2016 as a result of the crash in global commodity prices and strengthening of the US dollar. This is reducing government revenue and increasing the relative size of debt payments in foreign currencies.

An analysis of low and lower middle income country governments by the Jubilee Debt Campaign finds that there have been significant falls in government revenue, and increases in debt payments, compared to what was expected just three years ago. This leaves many countries facing a large funding gap on what was expected. For comparison, this is $13 billion more than the $48 billion of aid which is claimed by the OECD to be spent in the 51 countries included in the study.

Tim Jones, economist at the Jubilee Debt Campaign, said:

“Many impoverished country governments are being hit by the fall in prices for the commodities they export, and large depreciations of currencies against the dollar. This is reducing government revenue, and increasing the relative size of debt payments in foreign currencies. On top of this, less tax is being collected than had been expected.

Tim Jones continued:

“In the 1980s commodity prices crashed and the US dollar rose, and the result was 20 years of debt crisis and large increases in poverty. To ensure history is not repeated, urgent global action is needed to cancel debts owed to reckless lenders, tackle tax avoidance and evasion, and change global trade rules to enable countries to diversify out of basic commodities.”

Jubilee Debt Campaign calculated the figures by comparing IMF and World Bank predictions from 2013 with those conducted between August and December 2015, since the most recent falls in commodity prices and exchange rates. It found that external debt service payments in 2016 will now on average be 10.8% of government revenue, compared to 6.1% predicted three years ago.

The main reason for these changes is that the fall in exchange rates and commodity prices means governments are receiving fewer dollars than had been expected. In addition, governments are collecting less tax revenue as a proportion of GDP than expected, and external debt payments are also higher. The IMF’s commodity price index has fallen by 26% since July 2015.

Three of the countries impacted by falling exchange rates and revenues from commodities are Ghana, Mozambique and Sierra Leone.

The Ghanaian Cedi has fallen by 50% against the US dollar since the start of 2013 after falls in prices for commodity exports such as oil and gold, and lower oil production than expected. It had been forecast three years ago that government revenue would be $12.6 billion in 2016, but now it is only expected to be $8.2 billion. In addition, external debt payments are expected to be $2.5 billion in 2016, when the previous IMF and World Bank prediction was $0.9 billion. In total this means external debt payments are now projected to be 30.2% of government revenue in 2016, up from 7.4%.

Since the beginning of 2013 the Mozambique Metical has fallen 40% against the US dollar. Prices for Mozambique commodity exports such as aluminium, oil, coal, gas, titanium and sugar have been falling. Mozambique is now expected to spend 10.1% of government revenue on external debt payments in 2016, compared to a prediction of 6.7% three years ago. Government revenue is down from a predicted $5.3 billion to $4.9 billion. External debt payments are up from a predicted $350 million to $500 million.

Sierra Leone
Sierra Leone’s economy has been hit both by the Ebola crisis and the collapse in price of its main export, iron ore, which has fallen by 75% since the start of 2013. Government revenue in 2016 is now expected to be $470 million compared to a prediction of $760 million three years ago. Debt payments in 2016 will actually be lower than previously predicted ($40 million rather than $57 million), primarily because of a suspension of debt payments to the IMF in response to Ebola. However, the fall in government revenue means that external debt payments will be 8.6% of government revenue, rather than a previously predicted 7.5%.

Moreover, payments to the IMF will resume again in 2017, making the deterioration worse. In 2017, 10.9% of government revenue is now expected to be spent on external debt payments, compared to a prediction of 6.7% three years ago.

The IMF and World Bank conduct Debt Sustainability Assessments for low income and some lower middle income countries. These predict GDP, government revenue and debt payments into the future. Eighteen countries have had such assessments since August 2015.

Jubilee Debt Campaign compared the figures in these assessments with those conducted for the same countries in 2012 or 2013, whichever was available. This found that across the 18 countries:

  • • External debt service is now predicted to be on average 10.8% in 2016 and 9.7% in 2017. It had previously been predicted to be 6.1% in 2016 and 6% in 2017.
  • Predicted government revenue across the 18 countries is down by $19.5 billion in 2016 and $17.3 billion in 2017, falls of 20.1% in 2017 and 17.8% in 2017.
  • Predicted external government debt payments across the 18 countries are up by $3.5 billion in 2016 and $2.7 billion in 2017, increases on what was previously expected of 74.4% in 2016 and 45.3% in 2017.

Across the 18 countries, they are collectively $23 billion worse off in 2016 and $20 billion worse off in 2017.

Jubilee Debt Campaign then used the average changes and applied these to other low and lower middle income countries with predictions in 2012 and 2013, a further 33 countries. If the average changes are replicated for these countries, then government revenue will be down by a further $34.1 billion in 2016, and debt payments up by $3.9 billion, a $38 billion loss in total. This added to the $23 billion makes a total loss in 2016 of $61 billion. The equivalent figure for 2017 is $53 billion.

A the list of countries and the detailed calculations are here


Ghana, Mozambique, Sierra Leone
Jubilee Debt Campaign is a company limited by guarantee, number 3201959
Jubilee Debt Campaign's registered charity number is 1055675