A growing number of countries are being forced to choose between repaying debt and investing in their people. One-third of low-income countries spend more on interest payments than on health and education, and in some cases nearly half of government revenue is consumed by debt costs. In some places, public services are being cut and regressive taxes are being introduced. In others, the political climate has deteriorated and protests have broken out over food prices and water shortages. In all of these contexts, debt is not just a macroeconomic issue, but also a moral and developmental concern.
CAFOD has been campaigning for years on the global debt crisis, and between 2000 and 2015, the global Jubilee 2000 movement won $130 billion of debt cancellation for 36 lower-income countries, reducing their debt by a third on average. We have also seen how debt relief allows governments to tackle corruption, invest in children’s education and improve health care, and support the private sector, boosting growth and fostering sustainable development.
The world needs to rethink the way we deal with sovereign debt. We need a clearer-eyed apparatus for assessing debt sustainability, and we should return to previous norms on what constitutes excessive debt. Debt-at-risk should be based on both growth and initial levels of debt, so that it is not just the poorest countries who end up paying the price for an era of reckless borrowing. And we need to focus on improving governance in order to create fiscal space for investments that boost productivity and enhance economic prospects.