In 2020, rich nations spent nearly $12trn , more than 31% of their combined GDP, to avert economic meltdown and cushion the effects of the COVID-19 pandemic on their citizens. This ‘fiscal stimulus’ does not include monetary stimulus in the form of lower interest rates and central bank purchase of financial assets.
In stark contrast, their response to the catastrophic economic effects of COVID on so-called developing countries in Africa, Asia and Latin America – described by World Bank president David Malpass as “worse than the financial crisis of 2008 and for Latin America worse than the debt crisis of the 1980s” – has been a kick in the teeth. In November, Ken Ofori-Atta, Ghana’s finance minister, commented that “The ability of central banks in the West to respond [to the pandemic] to an unimaginable extent, and the limits of our ability to respond, are quite jarring… You really feel like shouting ‘I can’t breathe.’”
Poor nations’ ability to respond to the pandemic is also hampered by woefully undeveloped healthcare systems. Average health spending per capita in high-income countries in 2018 was $5,562, 156 times higher than the $35.6 a year per capita spent in low-income countries and 21 times more than the $262 spent per head in ‘developing countries’ as a whole.
On the eve of November’s G20 summit, chaired by Saudi Arabia, UN secretary-general Antonio Guterres warned that “the developing world is on the precipice of financial ruin and escalating poverty, hunger and untold suffering” and pleaded with G20 leaders for a proportionate response. The G20 is really the G7 – that is, the seven leading rich nations, the USA, the UK, France, Germany, Japan, Canada, Italy – in disguise. They wield the power, while the other 13 nations, including Brazil, South Africa, Saudi Arabia and India, lend legitimacy to their decisions.
The rich nations’ response to the catastrophe afflicting poor nations is the ‘Debt Service Suspension Initiative’ (DSSI) – an offer for 77 ‘least developed countries’ to suspend interest payments to official creditors (i.e. rich governments, the IMF and the World Bank) until June 2021. Suspended payments will be added to their already unsupportable debt and every single cent will have to be paid within five years.
In Latin America and the Caribbean, only Bolivia, Grenada, Guyana, Haiti, Honduras and Nicaragua qualify for these paltry benefits. The rest must continue to stuff money into the mouths of their creditors in rich nations without pausing for even a day, instead of using this cash to cope with their medical and economic emergencies.
Rescuing the rich
But that’s not all. This debt ‘relief’ only applies to interest owed to governments, not what they owe private lenders. Even the World Bank has excluded itself from this minuscule generosity – David Malpass rejected calls to freeze $7bn in interest payments owing to it, saying that forbearance would harm the Bank’s ability to make new loans. As a result, only 41% of the $42.7bn that DSSI countries owed in debt payments in 2020 is eligible for relief.
The suspension of interest payments to government creditors makes it easier for these desperately poor countries to service their debts to private creditors – such as Blackrock, JP Morgan, HSBC, UBS and the wealthy individuals they serve. In other words, rich countries’ governments are not rescuing poor countries, they are rescuing rich investors in those poor countries.
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John Smith | Radio Free (2021-03-19T07:38:00+00:00) The greatest debt crisis in history is upon us. Retrieved from https://www.radiofree.org/2021/03/19/the-greatest-debt-crisis-in-history-is-upon-us/
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