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Many poor countries’ debts are at ‘crisis point’, with international debt repayments doubling since 2010, reaching their highest level in decades. In reaction to unaffordable debt, many governments are forced to cut public spending, undermining progress towards the Sustainable Development Goals. The United Nations Development Programme (UNDP) Administrator Achim Steiner has elaborated that global stock debts have risen to levels equal to the debt crisis of the 1980s. He argues that ‘a shift from traditional sources to commercial sources of financing’ and ‘increased public investments’ present new challenges for developing nations. He warns that ‘the trends are particularly unsettling for Sub-Saharan Africa’.
External government loans for developing countries have doubled from $192bn to $424bn between 2008 and 2017, reports The Guardian. In 2018, Angola used 57 per cent of its revenue to pay back debt, resulting in reduced public spending, which dropped by 19% in two years. Furthermore, Cameroon cut its spending by 20% and Egypt by 23%. Unaffordable debt has inflicted terrible repercussions upon developing countries historically, and unaffordable debt was reduced through grassroots activism movements at the turn of the millennium. Although there are new forces in the market, developing nations are again thrown into debt; calls for greater transparency in Sub-Saharan African finance deals are crucial towards preventive measures. Tim Jones, policy officer at the Jubilee Debt Campaign, issued a statement: ‘Debt problems are worsening on the African continent… we need new rules to make all lenders publicly disclose loans to governments at the time they are given’. He later stated that the world’s poorest countries are recklessly borrowing money, with the heaviest burden originating from their private lenders.
Government borrowing has been constructive, most being used in the public interest to greatly improve human development. However, falling commodity prices and the recent rise in interest rates have increased debt repayments by 85% between 2010 – 2018, reports Jones. The International Monetary Fund is increasingly concerned with the financial vulnerability of developing countries; there is evidence that high debt is holding back progress.
UNDP has called for action to ensure support for policies that enhance debt management. The UNDP is committed to easing the debt burden through continued work with governments and financial institutions. Jones proposes that ‘a vital first step is to require that all loans to governments are publicly disclosed, allowing parliaments, media and civil society to hold governments to account for borrowing.’ Despite attempts to ease debt distress, ongoing issues are clear, and developing economies lack resilience to shocks. Cyclone Idai threw much of East Africa into debt, and sudden market shifts were equally volatile. Market specialist, Jan Dehn, argues that weak local markets have made nations dependent on foreign support: ‘The lack of domestic markets is somewhat compensated by donor financing and China’. For developing countries, methods regarding financial stability vary, although reviews of foreign aid policy are necessary to strengthen resilience long-term.