Labour urged to lead global debt relief effort as cost of repayments soars
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Version 0 of 1. Campaigners call for action in 2025, as crippling repayments prevent spending to cut poverty and tackle climate crisis Campaigners are urging Labour to lead the charge for global debt relief in 2025, as new analysis shows lower-income countries spent 15% of their revenue on repayments this year – the highest level for three decades. Calculations by the charity Debt Justice, based on data from the World Bank, show repayments from poorer countries bottomed out at 4.4% of income in 2011 but have since trebled. “High debt payments are preventing the public spending needed to cut poverty and tackle the climate emergency,” said Debt Justice’s policy director Tim Jones. Gideon Rabinowitz, director of policy and advocacy at Bond, the anti-poverty coalition, said: “Lower-income countries are being crushed by unsustainable debt, therefore debt cancellation must be on the international agenda next year. This debt crisis is a symptom of a broken global financial system which reproduces this recurring cycle of debt crises.” Among the countries facing the highest repayments as a share of income in 2024 were Angola (65%), Laos (52%), Pakistan (43%) and Egypt (43%). The International Monetary Fund (IMF) recently agreed a fresh $7bn loan to Pakistan – the latest of a string of bailouts – despite warning that the country faced “high risks and a narrow path” to debt sustainability. Angola struck a deal earlier this year with the state-backed China Development Bank – its largest creditor – to avert a debt crunch. Chinese lenders, state and private, account for 13% of low-income countries’ repayments. Writing in the World Bank’s recent International Debt Report, its chief economist, Indermit Gill, warned: “it’s time to face the reality: the poorest countries facing debt distress need debt relief if they are to have a shot at lasting prosperity.” Labour’s manifesto at the general election cited “tackling unsustainable debt” as a priority for its global development agenda. With many global debt contracts governed by UK law, Debt Justice is also calling on the Labour government to pass legislation to ensure private sector bondholders are forced to take a loss, as part of future debt relief deals. Development minister Anneliese Dodds backed such a law in opposition. “The government needs to turn words into action in 2025 by pushing for an effective debt cancellation scheme and passing a law to ensure private lenders take part in debt relief,” Jones said. Debt outlays for lower-income countries are expected to remain high in 2025, at 14%. With some of it denominated in dollars, repayments would increase further in countries’ domestic currencies, if the greenback surges on foreign exchange markets as a result of Donald Trump’s policies as many analysts predict. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Pope Francis has called for debt relief as part of a jubilee year for Catholics, in 2025 – the first since 2000. He said this month: “In the spirit of this jubilee year, I urge the international community to work towards forgiving foreign debt in recognition of the ecological debt existing between the North and the South of this world. This is an appeal for solidarity, but above all for justice.” The crippling financial burden for developing countries in the late 1990s prompted the successful Jubilee 2000 campaign for debt forgiveness, which ultimately resulted in $130bn (£102bn) of debt being written off. As chancellor, Gordon Brown took a leading role in that campaign. Since coming to power in July, Keir Starmer’s government has opted not to reverse the Tories’ decision to dismantle the Department for International Development (DfID), which was set up by Labour in 1997, but abolished by Boris Johnson. Nor has Labour said when it will reverse cuts to overseas aid made by Johnson’s government, which ditched the pledge of spending 0.7% of national income on development. Rachel Reeves did not mention overseas aid or development in her budget speech in October. A UK government spokesperson said: “We are highly concerned about the debt challenges facing low-income countries. Supporting developing countries to tackle unsustainable debt is a key development priority of this government. “The UK is playing its full part alongside international partners to support countries who face debt distress, through international fora, as well as looking to strengthen the system for the future.” The World Bank data covers 84 countries categorised as low income, or lower-middle income, as well as upper middle-income countries classified as small island developing states. |