1980s ’ Redux? New context, Old Threats

By Anis Chowdhury and Jomo Kwame SundaramSYDNEY and KUALA LUMPUR, Sep 6 2022 (IPS) As rich countries raise interest rates in double-edged efforts to address inflation, developing countries are struggling to cope with slowdowns, inflation, higher interest rates and other costs, plus growing debt distress. Rich countries’ interest rate hikes have triggered capital outflows, currency depreciations and higher debt servicing costs. Developing country woes have been worsened by commodity price volatility, trade disruptions and less foreign exchange earnings. Anis ChowdhuryRising debt risks Almost 60% of the poorest countries were already in, or at high risk of debt distress, even before the Ukraine crisis. Debt service burdens in middle-income countries have reached 30-year highs, as interest rates rise with food, fertilizer and fuel prices. Developing countries’ external debt has risen since the 2008-09 global financial crisis (GFC) – from $2 trillion (tn) in 2000 to $3.4tn in 2007 and $9.6tn in 2019! External debt’s share of GDP fell from 33.1% in 2000 to 22.8% in 2008. But with sluggish growth since the GFC, it rose to 30% in 2019, before the pandemic. The pandemic pushed up developing countries’ external debt to $10.6tn, or 33% of GDP in 2020, the highest level on record. The external debt/GDP ratio of developing countries other than China was 44% in 2020. Borrowing from international capital markets accelerated after the GFC as interest rates fell. But commercial ...
Source: IPS Inter Press Service - Health - Category: International Medicine & Public Health Authors: Tags: COVID-19 Development & Aid Economy & Trade Energy Financial Crisis Global Headlines TerraViva United Nations IPS UN Bureau Jomo Kwame Sundaram & Anis Chowdhury Source Type: news