Economics viewpoint

The development crisis facing the global south

- Heather Stewart

With borrowing costs rising and western governments including the UK cutting their aid budgets, unsustainable debts are driving a development crisis across the global south.

Ethiopia last week faced the threat of being sued by its creditors in the English courts, after long-running negotiations about restructuring $1bn (£740m) of its debt collapsed.

New analysis published as the International Monetary Fund and World Bank met in Washington last week, by the advocacy group Development Finance International (DFI), shows the scale of the burden. Across the global south, debt servicing costs soak up an extraordinary 45% of government revenues, or as much as 70% in low-income countries.

With interest rates high, governments are now spending three times as much on servicing their debts as they are on education, and more than four times as much as on health.

That is a development crisis, because it limits the progress countries can make to improve their citizens' lives. It also risks becoming a crisis of democracy, if politicians of every stripe are subject to the same crushing financial constraints.