Countries in debt crisis cut public spending in face of soaring prices

New figures released this week by anti-poverty campaigners Debt Justice show that countries in debt crisis are expected to spend less in 2023 than in 2019, despite the urgent need for public expenditure in response to surging food and fuel prices. Lower income countries with the highest debt payments have seen public spending drops of an average of 3% between 2023 and 2019.

Increased public spending on essential services and infrastructure is vital for responding to soaring food and energy prices, climate crisis and other national needs, but the lack of effective debt relief mechanisms is forcing countries to cut public spending in order to make debt payments.

The research by Debt Justice is being released ahead of an inquiry by the UK Parliament's International Development Select Committee into the debt crisis in low-income countries. The UK has significant power to make private lenders take part in debt relief measures as 90% of bonds of countries eligible for the G20's debt relief scheme are governed by English law.

The G20 created a new debt relief scheme at the end of 2020, called the Common Framework, but none of the countries which have applied for it have yet had any debt cancelled. Private creditors could make large profits from their loans to lower income countries if repaid in full.

Tess Woolfenden, Senior Policy Officer at Debt Justice said:

"Lower-income countries are being forced to prioritise debt payments over public spending on healthcare or access to food, right at a time when spending is so urgently needed. The UK must act to make private lenders take part in debt relief. Debt repayments to wealthy lenders should not take precedence over people's needs in a time of multiple crises."

Abu Bakarr Kamara, Coordinator at the Budget Advocacy Network in Sierra Leone said:

"With Ebola and Covid-19, Sierra Leone has faced two major health crises in recent years, which have collapsed the health sector and the economy. Yet debt payments are taking away resources that are vital for recovery. Cancelling Sierra Leone's debt is one vital tool to help the Government increase its fiscal space to invest in the health sector in a transparent and accountable way."

Debt Justice, formerly Jubilee Debt Campaign, is a UK charity working to end poverty caused by unjust debt through education, research and campaigning. It works in close collaboration with Church groups who have long called for a Jubilee cancellation of the debts of low-income countries: https://debtjustice.org.uk/