Study Reveals 'Huge Benefits' of Greater Debt Relief for Low-Income Countries

Reducing the debt burdens of low-income countries could significantly improve education, sanitation, and health outcomes, according to a study conducted by researchers at the universities of St Andrews and Leicester. The study found that slashing debt repayments to more sustainable levels could enable 5 million more children to attend school and provide clean drinking water to 17 million people, among other benefits.

The research focused on 39 countries where debt payments currently average more than 22% of government revenue, and a broader group of 88 countries with debt payments exceeding 15% of government income. The study suggested that reducing debt payments for the first group to 14% of government revenue could grant 16 million people access to basic sanitation, 7 million access to clean drinking water, and 2 million children the opportunity to attend school. Additionally, it could save the lives of over 30,000 children and mothers who are at risk due to extreme poverty.

For the wider group of 88 countries, reducing external debt payments to 5% of government revenue could result in 33 million people gaining access to basic sanitation, 17 million access to clean drinking water, 5 million children attending school, and over 60,000 lives being saved.

Countries with high debt levels included in the analysis were Angola, Kenya, Pakistan, South Sudan, and Tunisia. The findings have prompted campaigners to call for more generous debt relief from creditors, especially as external debt payments are at their highest level in three decades.

The International Monetary Fund (IMF) and the World Bank have been advocating for faster progress on debt relief through the Common Framework, although only a few countries have participated so far. The IMF has indicated that, post-debt relief, external debt payments should fall well below 14% to 23% of government revenue.

Dr. Bernadette O'Hare from the University of St Andrews emphasized the transformative potential of reducing debt for highly indebted countries. "These countries are often extremely vulnerable to climate change, and many governments must reallocate resources after extreme climate events," she said. "Debt reduction would significantly increase access to public services, reduce vulnerability to climate change, and positively impact millions of children and their families. The argument for debt reduction is overwhelming."

Heidi Chow, the executive director of Debt Justice, urged the UK government to prevent creditors from suing poor countries for unpaid debts in UK courts. "The opportunity to vastly improve the life chances of millions of people across lower-income countries is staring the government in the face," Chow stated, calling for new legislation to ensure that banks and hedge funds cancel debt to sustainable levels.