‘Huge benefits’ in greater debt relief for lower income countries, study finds

Debt for Climate activists block an entrance to the German finance ministry during the 2022 G7 summit in Berlin. Photograph: Christian Mang/Reuters

Reducing the debt payments made by poor countries to more sustainable levels could help 5 million more children attend school and provide access to clean drinking water to 17 million people, according to research.

A study by academics at the universities of St Andrews and Leicester said there would be “huge benefits” – including saving the lives of 60,000 children and mothers – from slashing the size of repayments.

With external debt payments running at their highest level in three decades, the findings of the study were seized upon by campaigners urging creditors to offer more generous terms to low-income countries.

The report looked at 39 countries where debt payments average more than 22% of government revenue and a wider group of 88 countries where debt payments average more than 15% of government income.

It found that, if debt relief reduced payments for the group of 39 countries to 14% of government revenue, 16 million people could gain access to basic sanitation, 7 million could access clean drinking water, 2 million children could attend school and more than 30,000 children and mothers could survive the threat to life of extreme poverty.

If external debt payments for the wider group of 88 countries were cut to 5% of government revenue, the study said 33 million people could gain access to basic sanitation, 17 million could access clean drinking water, 5 million children could attend school and more than 60,000 children and mothers could survive.

Angola, Kenya, Pakistan, South Sudan and Tunisia were among the countries with high debt levels included in the analysis.

The International Monetary Fund and the World Bank have been urging faster progress on debt relief through a process known as the Common Framework, although only a handful of countries have so far taken part. The IMF position – outlined in a guidance note released earlier this month – is that, after debt relief, external debt payments should be well below 14% to 23% of government revenue.

Dr Bernadette O’Hare from the University of St Andrews said: “There is the potential for huge increases in welfare in highly indebted countries if debt was reduced to sustainable levels. These countries are often extremely vulnerable to climate change and many governments must reallocate resources after extreme climate events.

“Access to basic public services is critical for increasing a community’s resilience to climate change. These figures demonstrate that debt reduction would significantly increase access to public services, reduce vulnerability to climate change, and would positively impact millions of children and their families. The argument for debt reduction is overwhelming.”

Heidi Chow, the executive director of Debt Justice, also called on the government to prevent creditors from using the UK courts to sue poor countries for non-payment of debts.

“The opportunity to vastly improve the life chances of millions of people across lower income countries is staring the government in the face. The government can make these figures a reality by passing new legislation to ensure banks and hedge funds cancel debt to sustainable levels.”