Responding to the COVID-19 pandemic has required even countries with the world’s largest economies and health systems to take extraordinary steps to finance their protection of people’s jobs and lives. The US stimulus packages are measured in the trillions of dollars; in the UK, the NHS has had £13.4 billion of historic debt written off and an additional £6.6 billion given to strengthen it. But as the virus spreads globally, how can countries respond if they have health systems and public services in need of urgent investment, but are struggling economically?
The needs are huge. In the Democratic Republic of Congo, for example, even providing people with what they need to do proper handwashing would be a massive project: UNICEF notes that almost half the population doesn’t have access to improved water facilities, and less than 29% to improved sanitation. And if patients were to need ventilators, the numbers available in many countries are tiny. According to the New York Times, the DRC has a population of over 84 million – and at most 5 ventilators. Liberia has 7. Namibia 10. Uganda 55. Even Ghana, one of the best provided countries in sub-Saharan Africa, has only one ventilator for every 146,701 people.
Finance isn’t the only factor involved in developing services and health systems. But it is vital. And it is a particular challenge now, as low-income and middle-income countries are hit by drops in exports, plunging currencies and commodity prices, capital flight, and reduced income from remittances sent by overseas workers. And that’s before any impacts from widespread illness or preventative measures taken against COVID-19.
One way to make extra finance available for healthcare is by offering countries debt relief. Servicing external debt is a considerable burden on many developing countries. The Jubilee Debt Campaign has estimated both that 64 low- or middle-income countries spend more servicing their external debts than they do on public healthcare and that $40 billion could be freed up for 76 of the world’s poorest countries if they didn’t have to make payments for the rest of this year to their bilateral, multilateral or private creditors.
The idea has widespread support: Pope Francis, a group of African and European heads of state, African finance ministers, the World Bankd and IMF, and various UN bodies have all called for debt standstills and/or debt relief. And there has already been some progress. Thanks to $500 million of donations (including $185 million from the UK government), the IMF has been able to forgive payments owed to it by 25 of the world’s poorest countries. The G20, meanwhile, has agreed to defer payments on debts owed to the countries that are its members, a move that should make about $12 billion available for use this year.
But the G20 move is a standstill, not debt forgiveness: interest on what’s owed to the G20 will continue to accrue, and the deferred payments will need to be made between 2022 and 2024. This is worrying, as countries might still be recovering from Coronavirus-related economic shocks in 2022 – and having to pay additional amounts on top of their regular payments could prove difficult. There’s also a risk that because debts to multilateral institutions and private creditors aren’t included in the G20 agreement (though the G20 urged others to join in), money freed up will simply be diverted to repay other creditors. Indeed, there are fears that private investors will buy distressed countries’ debts at bargain basement prices and then try to use lawsuits to force the countries to prioritise payments to them – even if that uses up the money freed by other creditors.
To deal with such difficulties, African leaders, UN bodies, NGOs and think tanks are calling for a wider programme. European and African leaders jointly called for “an immediate moratorium on all bilateral and multilateral debt payments, both public and private, until the pandemic has passed.” The Prime Minister of Ethiopia has explained that this would involve a moratorium until at least the end of 2022. The UN body concerned with trade and development is calling for not only moratoria but also progress towards a comprehensive plan of debt relief and restructuring, with a proper international architecture to support it. A global coalition of NGOs is making similar calls, asking for cancellation of all external debt payments in 2020 with no accrual of interests and charges, debt relief, legislation in the US and UK (where most debt litigation occurs) to prevent speculators from taking developing countries to court over 2020 payments, and the creation of an international architecture for sovereign debt restructuring.
Debt relief has already been shown to contribute to development. It is now urgently needed to help brothers and sisters worldwide save lives during the pandemic we all face.