Developing Countries are Trapped in a New Debt Crisis : How Can This be Explained?

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Two centuries ago, at the start of the capitalist industrial revolution, the difference in per capita income between what are now called developing and developed countries was very small. Today’s victorious capitalism on a global scale has increased the gap between nations as never before. Not to mention the gap within each nation, whether in the South or the North, between the richest 1% and the bottom 50%.

DECEMBER 20, 2023

Developing Countries are Trapped in a New Debt Crisis : 

How Can This be Explained?

BY ERIC TOUSSAINT

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Photo by Alice Pasqual

The latest World Bank report on the debts of “developing countries”, published on December 13, 2023 [1], reveals an alarming fact: in 2022, developing countries as a whole spent a record US$ 443.5 billion to pay for their external public debt. 

• The 75 low-income nations that are eligible for loans from the International Development Association (IDA), a World Bank organization that provides loans to the world’s poorest nations, paid a record US$ 88.9 billion to its creditors in the same year, 2022. 
• These 75 nations have an unprecedented total external debt of US$ 1,100 billion, which is more than twice as much as it was in 2012. 

As per the press release from the World Bank, the nations in question experienced a 134% increase in their foreign debt between 2012 and 2022, which was greater than the 53% increase in their gross national income (GNI).

The WB adds:

“Surging interest rates have intensified debt vulnerabilities in all developing countries. In the past three years alone, there have been 18 sovereign defaults in 10 developing countries—greater than the number recorded in all of the previous two decades. Today, about 60 percent of low-income countries are at high risk of debt distress or already in it.”

The World Bank is therefore sounding the alarm: a new debt crisis has begun. Vast quantities of money are being used to pay off debts, rather than addressing the increasing needs of hundreds of millions of people who desperately need support. According to another World Bank report quoted by the Financial Times [2], between 2019 and 2022, over 95 million more people have fallen into extreme poverty.

The World Bank acknowledges that in 2022 private lenders began to turn off the tap of credit to developing countries, while squeezing the lemon to get the most repayments. In fact, according to the WB, new loans granted by private lenders to public authorities in developing countries fell by 23% to 371 billion dollars, their lowest level in ten years. On the other hand, these same private creditors collected $556 billion in repayments. This indicates that they collected $185 billion more in loan repayments in 2022 than they disbursed. According to the World Bank, this is the first time since 2015 that private creditors have received more funds than they injected into developing countries. . .

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It’s not true that humanity is committing suicide, as exemplified by the COP28 farce of a climate summit. The world’s industrialists and financiers are committing humanity to ecocide. More than ever, it’s easier to imagine the end of the world than the end of capitalism. Death by capitalism. That phrase has a certain catchy feeling to it. But it’s no joke, is it? No, no joke at all. No joke, and no vote. You didn’t get a vote on whether greenhouse gas emissions should continue at a pace to unleash catastrophically rising seas, unbearable heat, droughts, environmental destruction and an increasingly erratic climate in a cascade of cause and effect that will trigger still more climatic instability. The world’s capitalists — in particular, those who control and profit from fossil fuel corporations — have voted, did vote and will continue to vote for profits today and indifference to human and animal life tomorrow. Hurray!