Large amounts of foreign debt act as an albatross around the collective necks of many low and middle-income countries in the Global South. Funds that nations could be allocating to social expenditures such as education, health care, water, and sanitation are instead being diverted to repay foreign debt.
In 2003, Senegal, Malawi, and eight other African countries – many experiencing severe HIV/AIDS crises – spent more on debt service than on health care. In the Philippines, debt service eats up over 85% of the country’s fiscal revenues. High debt levels have also led to a perverse outflow of much needed development finance from poor countries. For more than a decade developing nations have been shipping out – in the form of interest and principal repayments – more capital to their creditors in the North than they receive in new loans. The net negative flow of financial resources from South to North was $19 billion in 2004 – more than double than what it was in 1990. The outflow of foreign exchange leaves many heavily indebted countries vulnerable to sudden capital flight and external shocks – precipitating factors of financial crises.
Although BIC does not actively work on debt, many debt-related issues factor prominantly in our work. See the 'contacts' tab for links to organizations actively working on debt issues.