The new debt crisis in the Global South

In January 2017 the government of Mozambique defaulted on a bond interest payment. Ghana is already dependent on loans from the IMF and World Bank to pay the high interest on loans from private lenders. Many of these debts are under the jurisdiction of the UK, with over 90% of subSaharan African government bonds owed under English law.

These are the first indications of a wider trend. Figures calculated by the Jubilee Debt Campaign, based on IMF and World Bank databases, show that developing country debt payments increased by 45% between 2014 and 2016. They are now at the highest level since 2007.

The rapid increase comes after falls in commodity prices in mid-2014 and the rising value of the US dollar. These changes have reduced the income of many governments which are reliant on commodity exports for earnings. They have also caused exchange rates to fall against the US dollar, which increases the relative size of debt payments as external debts tend to be owed in dollars.

The new figures from Jubilee Debt Campaign show that average government external debt payments across the 122 developing countries for which data is available have increased from 6.7% of government revenue in 2014 to 9.7% of government revenue in 2016, an increase of 45%. This is the highest level since 2007, when such payments were also 9.7% of government revenue (see graph below).