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UK must act to stop spiralling debt of world’s poorest countries, says new Christian Aid report
Thirty-one countries across the world are now in debt crisis, with a further 82 at risk, according to a new report by Christian Aid.
Meanwhile, vulture funds (the name given to funds which seek to profit by buying up high risk, high yield debt) in the UK and the US continue to profit from developing countries that are trapped in debt.
Three of the biggest root causes of debt crisis are lack of transparency, exploitative private sector actors, and ineffective, undemocratic global institutions responsible for managing debt.
These roots reach deep into the global financial centres, particularly the City of London, and the IMF and World Bank.
The UK is responsible for regulating much of the lending boom in impoverished countries, with 90% of publicly traded loans to the majority of African governments being given using English law.
Overall, while 20% of African debt is owed to China, 30% is owed to the private sector – mainly owed under UK law but due to lack of transparency we do not know the share of this held by UK-based banks.
The lack of transparency in UK law means there is not enough accountability of lending.
Christian Aid is calling for the UK to step up and meet what it say is its ‘moral responsibility to avert debt crises in developing countries that are often struggling to recover in the wake of humanitarian emergencies’.
The early 2000s saw a major round of debt relief for countries caught in a trap of debt repayments, in response to the Jubilee 2000 campaigns.
Since the western financial crisis of 2008, there has been another boom in irresponsible lending to countries of the global south.
Global debt rose to record levels in 2016 and this lending boom is threatening to set a new debt trap for people in poverty around the world.
Launched today as part of Christian Aid Week (12 – 18 May), the report The New Global Debt Crisis – published in collaboration with the Jubilee Debt Campaign – is urging the UK Government to end its complicity in exacerbating the already desperate situations faced by some of the world’s poorest countries.
One such example is Sierra Leone, which had little choice but to accept loans from the International Monetary Fund (IMF) to help it cope with the Ebola crisis which struck in 2014, killing nearly 4,000 people by January 2016, and 10% of the country’s health workers.
These large repayments inhibit the government of Sierra Leone from being able to look after the basic needs of its own citizens. The West African country lacks funds for proper health clinics, health training and enough ambulances, making it the most dangerous place in the world to become a mum.
Christian Aid is appealing to the whole international community to find urgent solutions, but particularly to the UK Government which has a disproportionate role in the debt crisis.
Almost half of international loans are owed under English law for which the UK parliament has responsibility.
Laura Taylor, Christian Aid’s director of policy and public affairs, said:
“It is shocking that developing countries find themselves yet again on the brink of a global debt crisis, 15 years after the last major round of debt relief.
“Countries like Sierra Leone, the most dangerous place in the world to become a mum, face huge debt repayments which deprive them of resources to protect their own citizens.
"It is unacceptable for the UK Government to be complicit in this new debt crisis, which sees some of the poorest countries in the world struggling and unable to get back on their feet following major humanitarian emergencies.
“The UK has a strong history of helping these countries when they are most in need; but too often the lack of transparency in the loans means we are giving with one hand and taking away with the other.
“It’s time we played our part in ending this new debt crisis rather than exacerbating it.
“It is already having a serious impact on the lives of some of the world’s most vulnerable, which is why in this report, we are calling for urgent action to be taken.”
Campaigners in churches across the country are joining Christian Aid in calling on the UK to use its influence with the IMF to ensure all Sierra Leone’s debts on the loans the country received for fighting the Ebola outbreak are written off.
The UK has direct responsibility for many loans which are given under English law, putting the solution stately in the hands of UK lawmakers.
Christian Aid is urging that:
- UK law is urgently changed to ensure that loans given under UK law, or by British-based banks, are transparent.
- Vulture funds are banned from profiting via the new debt crisis through UK courts.
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