• Government external debt payments reach highest level since 2004 following lending boom and commodity price falls in recent years
• Figures released before US Federal Reserve meeting where further interest rates rises are expected, which will push debt payments higher
Figures released today by the Jubilee Debt Campaign, based on IMF and World Bank databases, show that developing country debt payments increased by 60% between 2014 and 2017. They are now at the highest level since 2004.
The new analysis from Jubilee Debt Campaign shows that average government external debt payments across the 126 developing countries for which data is available have increased from 6.7% of government revenue in 2014 to 10.7% of government revenue in 2017, an increase of 60%. This is the highest level since 2004, when such payments were 12.6% of government revenue (see graph below).
This rapid increase comes after a lending boom due to global interest rates being low. External loans to developing country governments almost doubled from $200 billion per year in 2008 to $390 billion in 2014. They have since fallen back to between $300-350 billion per year from 2015-2017, but this is still well above levels seen prior to the global financial crisis.
The fall in global commodity prices in mid-2014 has reduced the income of many governments which are reliant on commodity exports for earnings. They also caused exchange rates to fall against the US dollar, which increases the relative size of debt payments as external debts tend to be owed in dollars.
Tim Jones, economist at the Jubilee Debt Campaign, said:
“Debt payments for many countries have risen rapidly as a result of a lending boom and fall in commodity prices. The situation may worsen further as US dollar interest rates rise, and as other central banks reduce monetary stimulus. Debt payments are reducing government budgets when more spending is needed to meet the Sustainable Development Goals
“Where there are debt crises, the risk is that the IMF will bail out reckless lenders, and the debt will remain with the country concerned. Instead, reckless lenders need to be made to bear some of the costs of economic shocks through lower debt payments, allowing governments to maintain spending on essential services.”
Countries with the highest debt payments in 2017 include:
- Commodity producers which have been hit by price falls, including Ghana, Mozambique, Angola, Chad, Gabon and Laos
- Countries which are paying debts contracted by previous dictators, including Gambia and Tunisia
- Countries which have had high debts for many years, sometimes decades, but have never been allowed into debt relief schemes, including Lebanon, Jamaica, Grenada and Sri Lanka
Developing country external debt payments fell between 2000 and 2010 because of rising prices of commodity exports and the Heavily Indebted Poor Countries Initiative, which cancelled almost $130 billion of debts owed to governments and multilateral institutions for 36 low and lower middle-income countries.
The IMF say that of 67 impoverished countries they assess, 30 are now in debt distress or at high risk of being so. This has doubled from 15 in 2013 (see graph below).
Further detail and references
The twenty countries with the highest debt payments in 2016 were:
| Country | External government debt payments as a proportion of revenue in 2017 | Particular issues | Recipient of HIPC debt relief |
| Angola | 55.4% | Oil exporter | No |
| Lebanon | 44.1% | Ongoing debt crisis, Syrian refugees | No |
| Ghana | 42.4% | Oil and gold exporter | Yes |
| Chad | 39.7% | Oil exporter | Yes |
| Bhutan | 34% | Small state, large debts linked to hydropower | No |
| Gabon | 26.9% | Oil exporter | No |
| Tunisia | 26.7% | Inherited dictator debts | No |
| Jamaica | 26% | Small state, high debt for many years but no meaningful cancellation | No |
| Grenada | 25% | Small state, high debt since hurricanes in 2004 and 2005 | No |
| Sri Lanka | 24.5% | High debt for many years but no meaningful cancellation | No |
| Georgia | 22.7% | Conflict | No |
| Gambia | 21.8% | Inherited dictator debts | Yes |
| Mozambique | 21.7% | Metals and fossil fuels exporter (NB. High payments even though in default on secret debts) | Yes |
| Belize | 21.4% | Ongoing debt crisis | No |
| Lao PDR | 19.4% | Metals exporter | No |
| Djibouti | 17.8% | No | |
| Venezuela | 17.4% | Oil exporter | No |
| Pakistan | 16.8% | Ongoing debt crisis | No |
| Yemen | 15.8% | War | Yes |
| St Vincent | 15.6% | Ongoing debt crisis, climate change | No |
The full figures for all 126 countries are available here.
The average figure is a mean unweighted average. The median unweighted average has increased by 75% between 2014 and 2017, from 4.9% of government revenue to 7.9%, indicating that the mean increase is a general trend rather than due to particular outliers.
Where they are available, the figures for government external debt payments as a proportion of revenue come from IMF and World Bank Debt Sustainability Assessments conducted for individual countries. In total these cover 60 countries.
For the other 65 countries, figures for government external debt payments are from the World Bank’s International Debt Statistics 2018 and figures for government revenue are calculated from the IMF’s World Economic Outlook Database, October 2017.
The IMF’s commodity price index fell from 185 in June 2014 to a low of 83 in January 2016. It has since increased to 106 as of June 2017 (the most recent date available from the IMF), but this is still 42% below levels in mid-2014.
Since mid-2014 there have been, for example, the following falls in currency against the US dollar:
Angolan kwanza: down 54%
Mozambique metical: down 52%
Zambian kwacha: down 37%
Ghanaian cedi: down 29%
Tunisian dinar: down 29%
Annual external loans disbursed to low and middle-income country governments have increased from $202 billion in 2008 to $390 billion in 2014. For 2015-2017, disbursements have been $332 billion, $347 billion and $332 billion. Source: World Bank World Development Indicators database.