COVID-19 and debt in the global south: Protecting the most vulnerable in times of crisis I

Added 26 Mar 2020
This is the first part of a blog series covering the impact of COVID-19 on vulnerable countries in the global south. Part 1 analyses the impact of debt burdens on health services. Part 2 discusses how the economic crisis will affect countires in the global south. Part 3 highlights the degree of vulnerability of countries in the global south to the COVID-19 pandemic. Part 4 provides a discussion on policy responses to tackle the risks posed by the pandemic. 

The human and economic toll of COVID-19 is a stark reminder of the fragility of our globalised society. Countries’ ability to contain the outbreak across borders is being defined by their capacity to provide effective protection to the most vulnerable. Until now, more than 98 per cent of the cases of COVID-19 have been reported in China and high-income countries. The majority of these countries have advanced health care systems with the resources required to meet the challenges posed by the pandemic. Unfortunately, the same cannot be said of the large majority of countries in the global south. According to the WHO, weak health care systems lack the capacity or performance requirements to provide effective access to medical interventions in the context of a pandemic. 

There is a clear overlap between vulnerable public health care systems and debt in developing countries. Rising debt levels limit the capacity of these countries to provide services designed to guarantee basic human rights. While other factors have an influence over expenditure patterns, the fact is that if more resources are dedicated to debt service then fewer are available for health services. High debt burdens and systemic under-investment in health services provide the context to understand the vulnerabilities of countries in the global south to the COVID-19 pandemic. 

 An analysis of the relationship between debt and health services in Low Income Economies (LIEs)1  paints an alarming picture: 
  • Debt is prioritised over public health services: 46 countries were spending more resources on public debt service than on their health care systems as a share of GDP in 2018 (Figure 1). Countries in this group (data points above the 45-degree line) spent on average 7.8 per cent of GDP on public debt service and 1.8 per cent of GDP on public health services. Even in countries where debt vulnerabilities are considered financially under control and sustainable, debt services are still prioritised over other key areas of public expenditure. 
  • Systematic under-investment in public health care systems: Countries are spending less on health care with respect to both debt and the minimum requirements of the Agenda 2030. The WHO estimates that meeting SDG 3 will require countries with poor health care systems to spend at least 8.6 per cent of GDP on health care by 2030. A decade away from this goal, 59 LIEs are currently spending less than half of this amount (Figure 1 - data points to the left of SDG benchmark). No country that spends more resources on public debt service than health care meets this basic expenditure threshold for SDG 3.
Figure 1 - Public debt service and health care expenditure in Low Income Economies (as a % of GDP - 2018)
Source: IMF country DSA, World Bank WDI
  • Higher debt burdens translate into lower public health care expenditure: LIEs spent on average 28.5% of their public revenues on debt service and 2.5 per cent of GDP on health care services (Figure 2). For the top 25% of countries with the highest debt service to revenue ratios, debt service increases to 68.9 per cent of public revenues while health care expenditures decrease to 1.8 per cent of GDP. 
Figure 2 - Impact of public debt service on health care expenditures in Low Income Economies (2018)
Source: IMF country DSA, World Bank WDI

  • Less expenditure on health care weakens capacity response: Higher debt service and lower expenditures on health services translate into lower availability of health care professionals (Figure 3). The WHO estimates a ratio of 2.28 health workers per 1000 population to classify the capacity of a health care system.2 Countries below this ratio are considered to have a poor or vulnerable health care system.  58 countries across the different debt risk groups are estimated to be below this threshold. In 42 countries, capacity concerns are coupled with health service performance issues (Figure 4).3  In these cases, even if emergency resources are made available, a process of scaling up health care services in the event of an outbreak would represent a major challenge. 
Figure 3 - Impact of public debt service on health care system capacity in Low Income Economies (2018)
Source: IMF country DSA, WHO Global Health Observatory

Figure 4 - Presence of health care system capacity and performance limitations in LIEs
Source: WHO Global Health Observatory
  • Health care systems limitations place women in a highly vulnerable situation: A limited public response to a pandemic increases the burden of unpaid care work on women and increases their exposure to it. While evidence suggest that men have a higher mortality rate than women to COVID-19, it is mainly women who will carry the extra burden of the care tasks that overwhelmed and under-resourced public services may be unable to provide, by taking care of the sick and of dependents. This will only multiply the gendered impacts of austerity cutbacks to public healthcare and services which have already been deployed to address debt vulnerabilities, often at the request of the IMF. This context places women at the front line of the fight against the pandemic. 
Vulnerabilities faced by countries in the global south in the context of COVID-19 are not limited to the weakness of their health care systems and extend to the economic impact of the pandemic. 

LIEs include 59 countries eligible for IFI concessional financing, 13 high-income small states and four countries that have graduated from concessionality eligibility since 2010. For a complete list of countries included in the analysis, please refer to the methodological annex. 
2 In addition to other criteria such as GDP per capita levels and performance requirements. For a detailed explanation of the criteria used, refer to the methodological annex
3 For a detailed explanation of the criteria used, refer to the methodological annex.