How Spiralling Sovereign Debt Hurts The Poor

Spending on health, education hit as nations work on repayments.

- Rajiv Ranjan Singh

THE WORLD IS NAVIGATING a landmine of debt, riddled with bombs of socio-financial distress. The explosions caused by these lethal trappings often show up as social unrest, civil revolutions and rising tussle in government. Increased social tension and extremist politics stem from unsustainable debt that is preventing governments from spending to alleviate poverty or bridge economic disparities. Record debt and high interest rates have led to social unrest in Nigeria, Kenya, Sri Lanka and Bangladesh. These are manifestations of unequal prosperity generated by high public debt, which restricted the government’s ability to create jobs and spend on social welfare.

A recent UNCTAD report, ‘A world of debt 2024: A growing burden to global prosperity’, sounds an alarm. It highlights an unprecedented surge in public debt — both domestic and external general government borrowing — which reached a peak of $97 trillion in 2023.

The International Monetary Fund (IMF) estimates that at least 100 countries will have to reduce spending on health, education and social protection to meet debt repayments.

This is not the first debt crisis for the world. In the 1990s, Pope Jean Paul II and singer Bono (of rock band U2) had started a crusade of debt relief for poor countries. Their activism was motivated by the plight of debt-ridden African nations whose social welfare systems were paralysed because they were left with hardly any budget to spend on welfare. Neither Bono nor the Pope could have imagined that the same situation would play out in developed nations as well.