Mountains of debt deepening human and environmental crises

Developing countries are in a vicious debt cycle with little relief in sight, undermining social progress.

Synopsis: The Straits Times' global contributor Nirmal Ghosh shines a light on Asian perspectives of global and Asian issues with expert guests.

Some 3.3 billion people live in countries that spend more on interest payments in their debt, than on either education or health. In 2023, a record 54 developing countries allocated 10 per cent or more of government revenue just to pay off interest on their debt - reducing funds available to provide basic services from schools to hospitals, for their populations.

Public debt thus becomes a human rights crisis, as well as an environmental crisis as most debt is denominated in foreign currencies. Countries then often have to export their way out of debt - which in many cases, such as in that of Laos, means exploiting their natural resources.

The crisis is worsened by the fact that for many developing countries, it is more costly to borrow than for rich countries - because their credit ratings are worse. For example, the average African country may be paying almost 10 per cent while the United States and Germany may be paying less than 3 per cent, because the latter have higher credit ratings.

In Laos' case, there is a geopolitical dimension as well; about 50 per cent of Laos's external debt is owed to China.

There is wide consensus that this is a full blown crisis, but the solutions to it are hard to implement. Part of the reason is many creditors are private lenders. Yet solutions are critical if developing countries are to be able to dig themselves out from under the mountain of debt they are burdened with.

In this episode of Asian Insider, Olivia De Schutter, professor of law and UN Special Rapporteur on Extreme Poverty and Human Rights, and Keith Barney, Associate Professor at the Australian National University's Crawford School of Public Policy, share with host Nirmal Ghosh insights into the fundamentally unjust situation many developing countries are trapped in.

Highlights (click/tap above):

1:52 Global debt: From $51 trillion in 2010 to $97 trillion in 2023

4:01 The Pact for the Future acknowledges the issue, but much public debt is owned by private creditors

5:53 Why Laos debt crisis is also an environmental crisis; China's role in this

10:04 Since the debt is in foreign currencies, countries must export to repay it

13:59 China offers debt deferrals, not relief, just delaying the issue

16:01 Debt burden is driving the international community to consider debt-for-nature or debt-for-climate swaps

Follow Nirmal Ghosh on X: https://str.sg/JD7r

Read Nirmal Ghosh's articles: https://str.sg/JbxG

Host: Nirmal Ghosh (nirmal@sph.com.sg)

Produced and edited by: Fa’izah Sani

Executive producer: Ernest Luis