A child suffering from malnutrition in central Malawi during the 2002 food crisis. The country spends more on debt repayments than it does on health care. It has one of the world’s highest child mortality rates.
UNICEF/2002/Abbie Trayler Smith
Poor countries are being crippled by debts that are impossible to pay back. A debt is said to be unpayable when the interest on the debt is bigger than the amount that the country produces, so the debt just keeps on getting bigger and can’t ever be paid back.
At the end of 2006, the total debt of developing countries stood at $2.9 trillion, and in that year they paid $573 billion trying to service that debt. In 2006, approximately $119.8 billion was given in aid to developing countries – just 5 per cent of their total debt.
If countries are spending huge amounts of money on debt repayments, they can’t spend money on improving life for the world’s poorest people. In Malawi, for example, more is spent on servicing the country’s debt than on health, despite nearly one in five Malawians being HIV-positive. Children are paying back the debt with their lives: the child mortality rate in Malawi is one of the highest in the world.
One of the biggest achievements of 2005 was that there was finally international acceptance of the principle of ‘100% multilateral debt cancellation’ – that is, that some developing countries should have all their debts wiped out.
This led to the decision by the G7 finance ministers meeting in the spring, later agreed by the G8 in Gleneagles, to wipe out the debt of 18 countries straight away. They also said that another 20 countries should be considered for debt relief if they meet strict criteria.
But damaging economic policy conditions are still being attached to debt relief. The good news is that in March last year the UK government agreed that this should stop – they promise to no longer make countries agree to bring in specific economic policies, including trade liberalisation. But many other countries and international institutions like the World Bank still need to take this step.