Poor countries cut public spending, debt payments trebled

  • Figures calculated by Jubilee Debt Campaign from IMF and World Bank data show that growing debt burdens are contributing to public spending cuts
  • For the 15 countries spending over 18% of revenue on debt payments, 14 saw public spending cuts between 2015 and 2019
  • Average external government debt payments for the 63 most impoverished countries (where data is available) are set to increase by between 133% and 216% by 2022

New figures released today by Jubilee Debt Campaign show that poor countries with large debt payments are suffering from public spending cuts. Jubilee Debt Campaign has used IMF data to calculate debt payments and public spending cuts for 60 countries where there is information. Of these, for the 15 countries spending over 18% of revenue on debt payments, 14 saw real public spending per person fall between 2015 and 2018. On average, these 15 countries had cuts in public spending of 13% between 2015 and 2018.

In contrast, for the 30 countries with the lowest debt payments, public spending increased by 14% between 2015 and 2018.

Street sellers in front of a mural in Lusaka, capital of Zambia. In 2019 Zambia’s public spending is due to be 18% lower than in 2015 with further cuts anticipated by the IMF for several years to come. (Photo David Brown / Flickr).

Furthermore, average external government debt payments are expected to increase across the board over the next three years. Using IMF data, Jubilee Debt Campaign has calculated that average external debt payments for the 63 most impoverished governments in the world (for which there is data) are predicted to increase by between 133% and 216% on 2011 levels by 2022.

Debt payments will continue to increase over the next three years in the best-case scenario – of strong economic growth and no economic shocks. But if there are widespread economic shocks – such as falls in commodity prices, rising interest rates or widespread disasters due to climate change – average debt payments could continue to increase rapidly to the highest level in over 20 years.

Sarah-Jayne Clifton, Director of Jubilee Debt Campaign said:

“The world must wake up to the growing debt crisis in poor countries. Ballooning debt payments and cuts in public spending are a recipe for disaster. Meeting the Sustainable Development Goals to cut poverty and inequality requires large increases in public spending, but in many countries the opposite is happening. We need the IMF and World Bank to stop bailing out the reckless lenders who are contributing to runaway debts and play their part in bringing about fair and rapid debt restructurings for countries in crisis.”

Republic of Congo has seen huge cuts in public spending of well over 50% between 2015 and 2018. Chad has the next highest cuts of 35% by 2018. Both these central African countries are in debt crisis following loans from oil traders. Mozambique’s public spending has been cut by 21% on 2015 levels by 2018, following the country’s debt crisis triggered by secret loans from London-based banks.

Zambia has increasing debt payments primarily due to high interest rate bonds and other loans from commercial banks, while its revenue has been hit by falls in the price of copper. In 2019 Zambia’s public spending is due to be 18% lower than in 2015 with further cuts anticipated by the IMF for several years to come. Sierra Leone’s debt payments have shot up following the Ebola crisis. Almost half of the government’s external debt is owed to the IMF. Public spending in 2018 in Sierra Leone was 10% less per person than in 2015, though the cuts on 2016 levels are even greater – 17%.

Graph 1. Mean average external government debt service, 1998-2030 (1998-2018 actual, 2019-2030 IMF baseline estimate and IMF one economic shock estimate)

Graph 2. Index of real public spending per person, grouped by the 30 countries with lowest debt payments and 30 countries with the highest debt payments, and the 15 with debt payments over 18% of government revenue. Figures for 2019 are projections.

For further details including the methodology and data sources please read our briefing ‘The increasing global South debt crisis and cuts in public spending

We would like to thank Action Aid International for contributing to the costs of this research.

Tags

Share this article

Share This