Press release

New figures show debt crises are growing across the globe

·         Jubilee Debt Campaign analysis shows 31 countries now in debt crisis, up from 27 in 2017 and 22 in 2015

·         A further 82 are at risk of a debt crisis

·         Figures released on 20th Anniversary of 70,000-strong protest outside the G8 in Birmingham, UK, calling for cancellation of unpayable developing country debt

Vulture Funds protest @ Philip Davies MP

Vulture Funds protest @ Philip Davies MP

Image by Leeds TIDAL

on 16 May.[1] The figures are being released on the 20th anniversary of the G8 meeting in Birmingham (UK) 1998, when 70,000 people formed a human chain around the summit and called for unpayable developing country debt to be cancelled.

The new figures, calculated by the Jubilee Debt Campaign, classify countries as in debt crisis if they have a large financial imbalance with the rest of the world and high government payments on external debt as a proportion of revenue.[2]

According to this analysis, 31 countries are now in debt crisis, up from 27 in 2017 and 22 in 2015.[3] The 27 countries include:

·         Impoverished countries which have been hit by the fall in global commodity prices, including Ghana, Lao PDR, Mongolia and Mozambique;

·         Eurozone countries hit by the 2008 crash and subsequent austerity policies, including Greece, Ireland and Portugal; and

·         Countries in the global South which have been in debt crisis for many years, having never qualified for previous debt relief schemes, including Jamaica, Pakistan, Sri Lanka and Tunisia.

Tim Jones, economist at the Jubilee Debt Campaign, said:
“The global Jubilee movement successfully won $130 billion of debt cancellation for some of the most impoverished countries, leading to increased spending on health and education. However, there was insufficient action to prevent future crises and now we are seeing a worrying spread of new crises across the world. We urgently need more responsible lending and borrowing, and mechanisms to ensure reckless lenders pay their share of the costs of crises when they occur.

“Recent experience has shown debt crises can affect people in all countries, and can result from both government and private sector borrowing and lending. These figures show there are already debt crises on all continents, but even more countries are at risk of economic shocks turning vulnerability into a full blown crisis.”

The analysis also concludes that 47 countries are at risk of a public debt crisis and 62 countries are at risk of a private debt crisis. Some countries are included in both these groups, such as Argentina, Egypt and the United States. In total, 82 countries are at risk of either a public or private debt crisis, or both.

Countries at risk of a private sector debt crisis include Australia, Brazil and the UK, and those at risk of a public debt crisis include Ethiopia, Senegal and Zambia.

The analysis of risk of either a public or private sector debt crisis is based on a country having a significant financial imbalance with the rest of the world, and either a significant government debt or debt payments, or significant private sector debt, compared to the country or government’s capacity to repay.[4]

In March 2018 Jubilee Debt Campaign released figures which show that developing country debt payments have increased 60% in three years, and are now at their highest level since 2004.[5]

The IMF and World Bank only conduct comprehensive debt sustainability assessments for 67 of the most impoverished countries in the world. Of the countries they assess 30 are in debt distress or high risk of being so, up from 15 in 2013. In contrast, just 10 are at low risk, down from 24 in 2013.[6]

Notes

The Jubilee Debt Campaign is a UK charity working to end poverty caused by unjust debt through education, research and campaigning:http://www.jubileedebt.org.uk

[1] The countries evaluated as in debt crisis or at risk of being so are:

In debt crisis

At risk of public and/or private debt crisis

At risk of public debt crisis

At risk of private debt crisis

Angola

Argentina

Antigua and Barbuda

Albania

Belize

Armenia

Central African Rep.

Australia

Bhutan

Belarus

Comoros

Benin

Chad

Burundi

Cote d’Ivoire

Bolivia

Congo, Rep.

Cape Verde

Ethiopia

Bosnia

Cyprus

Costa Rica

Guinea

Brazil

Djibouti

Dominica

Kenya

Bulgaria

Gabon

Dominican Rep.

Liberia

Burkina Faso

Gambia

Egypt

Malawi

Cambodia

Georgia

El Salvador

Nepal

Canada

Ghana

Honduras

Rwanda

Colombia

Greece

Indonesia

Samoa

Croatia

Grenada

Kyrgyz Rep.

Senegal

Estonia

Ireland

Macedonia

Sierra Leone

Fiji

Jamaica

Mexico

St Kitts and Nevis

Hungary

Lao PDR

Morocco

Suriname

Jordan

Lebanon

Nicaragua

Tanzania

Kazakhstan

Lithuania

Niger

Tonga

Kosovo

Mauritania

São Tomé and Príncipe

Tuvalu

Latvia

Mongolia

Serbia

Zambia

Mauritius

Montenegro

Slovenia

 

Moldova

Mozambique

Slovak Rep.

 

New Zealand

Pakistan

St Lucia

 

Palau

Portugal

Tajikistan

 

Panama

South Sudan

Timor-Leste

 

Papua New Guinea

Spain

Ukraine

 

Paraguay

Sri Lanka

United States*

 

Peru

St Vincent

 

 

Poland

Tunisia

 

 

Romania

Venezuela

 

 

Seychelles

Yemen

 

 

Solomon Islands

 

 

 

Turkey

 

 

 

Uganda

 

 

 

UK

 

 

 

Vanuatu


* The United States government owes its debt in dollars, a currency it controls, so is unlikely to have difficulty paying its debt. However, the scale of US government debt owed outside the country now means it is at risk of this debt contributing to an economic crisis through the debt payments which are leaving the country and/or, a sudden fall in demand from external actors for US government debt, which could cause interest rates to increase rapidly.

[2] A large financial imbalance with the rest of the world is defined as a net international investment position of -30% of GDP or worse, or a current account deficit averaging over 3% per year for three years. The net international investment position is the difference between a country’s (both the public and private sector’s) external assets and liabilities.

Large government payments on external debt are defined as when government external debt payments are greater than 15% of government revenue.

[3] For the 2015 calculations see ‘The new debt trap: How the response to the last global financial crisis has laid the ground for the next’http://jubileedebt.org.uk/reports-briefings/report/the-new-debt-trap

For the 2017 calculations see https://jubileedebt.org.uk/press-release/global-debt-crises-threats-increase-across-world

[4] Countries are assessed as at risk of private sector debt crisis if they have:
a) A net international investment position of -30% of GDP or worse OR a current account deficit of more than 3% of GDP, averaged over the last three years
AND
b) Private external debt of over 40% of GDP OR 150% of exports

Countries are assessed as at risk of a public debt crisis if they have:
a) A net international investment position of -30% of GDP or worse OR a current account deficit of more than 3% of GDP, averaged over the last three years
AND
b) External government debt payments projected by the IMF to exceed 15% of government revenue (over several years) with one economic shock OR government external debt over 40% of GDP or 150% of exports OR government external debt payments over 10% of revenue.

A list of the figures for all countries is at: https://jubileedebt.org.uk/wp/wp-content/uploads/2018/05/Summary-country-risk-categories-and-ratings_05.18.pdf 

Figures on the net international investment position come from:
http://data.imf.org/regular.aspx?key=60947518 or if not available are calculated using external debt and reserves figures from http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators&preview=on

Current account, government revenue and GDP data is from: http://www.imf.org/external/pubs/ft/weo/2017/01/weodata/index.aspx

Government external debt data is from: http://databank.worldbank.org/data/reports.aspx?source=quarterly-external-debt-statistics/sdds-(new) or where not available http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators&preview=on . This and international investment position data are used to calculate private sector external debt.

Government external debt payments are from:http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators&preview=on or the IMF Debt Sustainability Analysis for the country concerned, available at http://www.imf.org/external/pubs/ft/dsa/lic.aspx?t=0&pg=0 . These do not cover some rich countries, so data has been calculated individually for each rich country based on IMF data on external debt and interest payments.

Exports data is from: http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators&preview=on

Whether external government debt payments are projected by the IMF to exceed 15% of government revenue (over several years) with one economic shock comes from the IMF Debt Sustainability Analysis for the country concerned, available at: http://www.imf.org/external/pubs/ft/dsa/lic.aspx?t=0&pg=0

[5] See https://jubileedebt.org.uk/press-release/developing-country-debt-payments-increase-by-60-in-three-years

[6] https://www.imf.org/external/Pubs/ft/dsa/DSAlist.pdf

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