Many of the world’s poorest countries have huge debts which lock them into poverty. As a result governments cannot spend money on public services such as health.
The debts of the 49 poorest countries are together estimated to total US$ 375 billion. The amount runs into trillions when the debts of other developing countries are also taken into the picture. Many of the world’s least developed countries spend more servicing external debts than on their total health budget.
“Debt is tearing down schools, clinics and hospitals and the effects are no less devastating than war.”
Adabayo Adedji, African Centre for Development Strategy
How did countries get into debt?
Often countries amassed debts because of the result of careless or self-interested lending by the rich world in the 1970s. These were loans offered by rich countries, private banks and international institutions like the World Bank.
One of the factors in this was that rich countries and their banks had a lot of money to lend out because of a period of high oil prices. Many wealthy countries were also keen to develop allies in the Cold War, so lent money with little concern for whether it was being spent wisely or was propping up oppressive leaders.
When these high oil prices came to an abrupt end, the result was a leap in interest rates and a hike in debts – at just the point when the main exports of many poor countries (commodities like coffee or cotton) began to plummet. The amount that many countries owed became enormous, even when they had made years of repayments.
Hasn’t much of the debt been cancelled now?
Thanks to a worldwide campaign, some countries have had their unpayable debts cancelled. However, many debts remain, and even when debts have been cancelled, there can be damaging and undemocratic strings attached to the debt cancellation.
The UK government still holds billions in debts from the developing world – despite cancelling many debts and being active in calling for further cancellation for the very poorest countries.
In Sierra Leone, rural women like Myriam in Northern Bombali, face the highest maternal mortality rate in the world.
Public services, like health, have suffered from a decade of neglect and a devastating civil war. Sierra Leone was finally granted debt cancellation worth $1.6 billion in late 2006.
How do debts affect health services?
Debts reduce the amount of money available to invest in health services. It is impossible for developing country governments to invest in decent public health facilities and programmes when they have to use valuable resources to service their debts.
Staff shortages, insufficient medical supplies, poor equipment, and an absence of accessible health facilities, all mean that millions of people in poor countries are unable to receive basic and essential health care.
Does cancelling debt make a difference?
Yes. The evidence shows it can make a huge difference.
In countries that have received debt cancellation, spending on health services has risen on average by 70%. Not only that but this money is being used effectively. For example:
- Nearly 70% of all births in Bolivia are now attended by a health professional.
- People no longer have to pay for health care in rural Zambia as a result of debt cancellation and aid increases.
- Debt cancellation has enabled Malawi to invest in public services like health.
But debt cancellation is not the end of the story
To qualify for debt relief countries often have to cut their health spending even more. Moreover, relief deals usually come with damaging and undemocratic strings attached.
Policies pressed onto governments by creditors like the World Bank often weaken the role of the state in providing healthcare by pushing privatisation and deregulation of the private sector. This can make it harder for poor countries to ensure the most effective healthcare provision.
It is vital that creditors stop attaching strings to debt relief or loans which press governments to follow particular economic policies.
Health Poverty Action says:
We are calling for urgent debt cancellation to help deal with developing countries’ health crises. In particular we urge that:
- Rich countries, institutions and commercial creditors must cancel all illegitimate and unpayable debts being claimed from all developing countries, not just the debts of countries which manage to fit the criteria of the existing international debt relief scheme.
- Creditors should not attach strings to debt relief or loans which press governments to follow particular economic policies – such as limiting public spending or specifying how healthcare should be delivered.
- Developing country governments must abide by the demands of their citizens that funds from debt cancellation be used to improve essential public services, including comprehensive primary healthcare. Developing country governments must be open and accountable to their people over the use and monitoring of these funds.
Download a four page briefing, produced by Jubilee Debt Campaign with Health Unlimited and Oxfam:
Debt and Health Briefing (284.26 Kb) (277.59 kB)
Last modified: 11/01/2011
