The global economic recovery may be on track, inflation is easing, and interest rates are finally declining. But these factors are unlikely to fix a debt crisis that has been more than a decade in the making, which is holding back investments and diverting resources away from essential services like health care and education.
The recent economic downturn and rising global interest rates have increased the cost of debt servicing for developing countries, which borrow at a rate two to four times higher than the U.S. and six to 12 times higher than Germany. In addition, the collapse in global commodity prices has eroded the revenue base of many low-income countries. The result is that debt-at-risk is rising faster than it would under normal conditions, and the number of countries with a debt-to-GDP ratio above 60% is rapidly growing.
Debt is a powerful force that can bring about catastrophic economic collapse, but governments can take steps to reduce the risks associated with high levels of debt. PIH’s advocacy team, led by Chloe Dahleen and Joel Curtain, is ramping up efforts to champion legislation and policy change—both within the United States and globally—to address predatory lending practices that keep dozens of poor countries locked in unsustainable cycles of debt.
Throughout the 1990s and into the 2000s, CAFOD worked for years to end the debt crisis for some of the world’s poorest countries through our global Jubilee campaign, which achieved debt relief for 36 countries that on average cut their debt by three quarters. We continue to fight for an equitable international system that can support the 78 low-income countries with debt-to-GDP ratios above 60 percent.
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