As the global economy recovers, the world is facing a growing debt crisis. According to the latest data, global public and private debt totals are at record highs. However, these figures mask significant differences across countries and income groups.
For individuals who cannot meet their financial obligations over time, they can file for bankruptcy and have their debts cancelled. But for countries, this is not possible.
Despite recent signs of economic stabilization and easing debt burdens, many low-income countries continue to struggle with unsustainable debt levels. More than 3.4 billion people live in countries that spend more on interest payments than they do on education or health. And more than 50 of these countries have debt servicing costs that exceed 10% of their revenue.
The root causes of this crisis stretch back decades. After OPEC quadrupled the price of oil in the 1970s, the money generated by this windfall was often deposited in Western banks that then made loans to developing nations. These loans were often made hastily and without careful monitoring. Often, they were used to fund armaments, failed or inappropriate large scale development projects, and private schemes benefiting government officials and a small elite.
The resulting debt burdens are now crippling growth and preventing the poorest countries from investing in the sustainable economic and social development needed to end poverty and inequality. To avoid future crises, the international community must support a re-thinking of global debt policies and implement a holistic approach to tackling unsustainable debt trajectories. This requires addressing both public and private debt, as well as promoting growth that benefits the majority of the population.
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