According to Gordon Brown, the former British Prime Minister, the international goal of eradicating extreme poverty by 2030 is currently under crisis after decades of making progress.
Brown said that health and education systems have been sacrificed by developing countries that are fighting the coronavirus so that it can pay back money to western and Chinese creditors.
“We need a comprehensive new plan that recognises the need for some countries to restructure and reduce debt,” Brown said in an interview to the Observer.
A call for an imminent child mortality crisis, a global solution is needed – this call was given by Brown prior to a crucial G20 meeting to be held next weekend.
The warning from Brown comes at a time when there are reports of rise in poverty and reversals in child health.
With the novel coronavirus pandemic weakening health systems and disrupting routine services, preventable diseases can cause the death of an additional 6,000 children every day globally, shows data from the Johns Hopkins Medical School.
But the debt obligations of many developing countries have limited their abilities to tackle Covid-19. Governments of some countries face a very difficult choice between repaying creditors or funding crucial public services in the face of little financial support flowing from the IMF and the World Bank.
This year and next year alone, more than $10bn will be paid back to creditors by African countries, according to estimates. Out of that amount, more than 50 per cent will be paid to City asset management firms, such BlackRock and Fidelity Investments.
While Chinese development banks and companies also are important creditors to such countries, a substantial amount to major commodity firms is also owed by many Africna countries.
According to estimates by analysts, the first African country that is on the course of defaulting on its debts to bondholders since the pandemic began will be Zambia. The country, just like many African countries, is spending more repaying debt compared to what it is expending for its health and primary education systems.
A Debt Service Suspension Initiative (DSSI) is being promoted by the G20 group of countries that is scheduled to meet in Saudi Arabia next weekend. Under this Initiative, a temporary debt service freeze, with repayments to follow over three years, will be given to 73 eligible countries.
43 of the 73 countries covered by the DSSI are expected to expend more to repay debts compared to health services.
Kevin Watkins, chief executive of Save the Children, said that there is scepticism among aid experts about whether the initiative would be supported by private creditors.
“The G20 debt initiative is an exercise in sleepwalking,” said Watkins. “At a time when many countries need permanent debt reduction, it offers a temporary pause on payments. It is treating a solvency crisis as a liquidity problem, repeating the mistakes that led to the debt crisis of the 1980s. The refusal of private creditors and China to participate in the initiative means that over half of the debt service bill for the poorest countries is not covered by the initiative.”
(Adapted from TheGuardian.com)