More than 30 leading economists, former finance ministers and central bankers have called for immediate debt relief for low- and middle-income countries, warning that loan repayments are preventing governments from funding basic services.
In a letter released on Sunday, in advance of next month’s World Bank and IMF annual meetings, the group says countries are “defaulting on development” even when they keep up with debt payments.
“Countries around the world are paying exorbitant debt servicing costs instead of paying for schools, hospitals, climate action or other essential services,” the letter said.
Among the signatories are Nobel Prize-winning economist Joseph Stiglitz, former Central Bank of Colombia Governor Jose Antonio Ocampo, and former South African Finance Minister Trevor Manuel.
The economists say African governments now spend an average of 17 percent of state revenue on debt servicing. Thirty-two African nations spend more servicing external debt than funding healthcare, while 25 allocate more to debt than to education.
The letter says capping the average ratio of state revenue used on debt servicing at 10 percent could provide clean water to about 10 million people across 21 countries, and prevent approximately 23,000 deaths of children below five years of age each year.
The call comes as healthcare systems across Africa show signs of severe strain.
According to an ActionAid report published earlier this year, 97 percent of health workers in six African countries said their wages were insufficient to cover basic costs. Almost nine in 10 reported shortages of medicines and equipment due to budget cuts.
The public sector funding crisis is exacerbated by shrinking aid budgets. The United States, previously the world’s largest donor, has cut funding this year as the administration of President Donald Trump has shifted priorities away from aid.
The International Rescue Committee said 10 of the 13 countries hit hardest by the US aid cuts are African.
Economists warn that current debt relief efforts have failed. A framework under the auspices of the Group of 20 has so far relieved just 7 percent of the total external debt owed by at-risk countries.
They are calling on leaders to urgently reduce debt burdens, reform how the World Bank and IMF assess debt sustainability, and support a “Borrowers’ Club” so countries can negotiate from a position of strength.
“Bold action on debt means more children in classrooms, more nurses in hospitals, more action on climate change,” the letter concludes.
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