Face the Facts! 3 - The Burden of Debt
How the Global Economy Harms People and the Environment
#3, Wednesday March 24,1999
The Burden of Debt
- The 41 countries classified by the World Bank as heavily indebted and poor (HIPC) had a total external debt of $215 billion in 1995, up from $80 billion in 1980. All but 6 of these countries are in the United Nations’ lowest human development category.*1
- Heavily indebted poor countries are caught in a downward spiral of debt-service that diverts resources away from economic development and squanders scarce aid resources, further dooming countries to poverty.
- In sub-Saharan Africa debt service consumes between one-quarter and one-third of foreign exchange earnings, diverting resources from productive investment.*2
- For every $1 received in aid grants in 1996, Africa paid back $1.31 in debt service. With more money flowing North than South, the debt burden creates a perverse Robin Hood situation where the rich get richer and the poor get poorer.*3
- Large debt service payments mean that vital social services must be sacrificed in order to meet debt payments, which makes the poor in these countries even worse off. In the 41 heavily indebted poor countries, compared with the average for all developing countries, children are 30% less likely to reach their first birthday, illiteracy is about 25% higher, and access to safe water and sanitation is 33% lower.*4
- Countries with large debt burdens put more pressure on the environment as the need to generate foreign exchange to pay debts increases. From 1990-1995 the 33 African countries classified as heavily indebted and poor (HIPC) experienced forest loss 50% greater than forest loss in non-HIPC African countries. African HIPC countries suffered forest loss 140% greater than the average forest loss in the world during this period. *5
*1 Overseas Development Council, "Poor Country Debt Relief", ODC Viewpoint, April 1998.
*2 Oxfam International, "Poor Country Debt Relief: False Dawn or New Hope for Poverty Reduction?" April 1997
*3 Jubilee 2000 Coalition, "Africa Profile"
*4 Oxfam International, "Poor Country Debt Relief: False Dawn or New Hope for Poverty Reduction?" April 1997
*5 Based on data from Food and Agriculture Organization of the United Nations, State of the World’s Forests 1997
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