Debt crisis in the Global South: 231 million people at risk!

Debt crisis in the Global South: 231 million people at risk!

In recent years, many developing countries in Asia, Africa and Latin America have been affected by a widespread debt crisis. These countries struggle with high debt burdens, which often account for more than 10 percent of their government revenue. A report by Misereor and the alliance erlassjahr.de shows that at least 47 “very heavily burdened countries” will be forced to hand over 15 percent or more of their income to foreign creditors over the next three years reports the Süddeutsche Zeitung.

The study covers the foreign liabilities of a total of 153 countries that are classified as developing countries or part of the Global South. These countries are essentially struggling with low gross domestic product, which threatens their economic stability. Around half of these countries' loans are taken out abroad, which creates significant currency risks reports the Tagesschau.

Alarming Figures

An alarming finding of the report is that around 231 million people in highly indebted countries are affected by extreme poverty. This represents about 18 percent of the total population of these countries, which is well over twice the global average. These alarming data underline the gravity of the situation in which the world's poorest countries are trapped.

Additionally, the report shows that the number of developing countries spending more than 10 percent of their income on interest has doubled in the last decade. Currently, 56 developing countries pay over 10 percent of their government revenue for interest, while 17 of them have to pay more than 20 percent complements the daily news.

Call to action

The head of the United Nations Development Program (UNDP), Achim Steiner, warns that the progress made in these countries in recent years is at risk. He calls for immediate action to prevent sovereign defaults, including a bold debt relief initiative to promote economic stability and growth. In perspective, the external debt service of developing countries, which is expected to reach 1.3 trillion euros in 2023, is alarming. What is particularly worrying is the increase in interest payments from the poorest countries, which quadrupled to 34 billion euros last year.

These challenges will be discussed in particular in the context of the G20 meeting in Cape Town, where solutions to support the affected countries will be discussed reports the Süddeutsche Zeitung.