Not all countries are equal in the eyes of financiers.
By Mauricio Uro
92 trillion dollars in 2022 exists in world public debt, according to the UN. 3.3 billion people live in countries where interest payments on debt are greater than spending on health or education.
The number of countries facing high levels of debt has risen sharply from 22 countries in 2011 to 59 countries in 2022. And they face the “very difficult” choice of serving their debt or serving their people.
30% of that debt belongs to developing countries, but the growth of that debt is faster in these countries than in developed countries, because they face additional challenges due to the high levels of external public debt, They are in foreign currency and that makes them more vulnerable to external situations.
On average, African countries pay four times more for loans than the United States and eight times more than the richest European economies.
This disparity in interest rates reflects the inequality inherent in the international financial system, which burdens developing countries disproportionately. Today, half of all developing nations spend a minimum of 7.4% of their export earnings servicing foreign public debt.
Currently, private creditors hold 62% of the external public debt, compared to 47% 10 years ago. However, there is no mechanism in place to address how to restructure debt between different classes of creditors: Bondholders, banks, and other lenders.
The reality is, not all countries are equal in the eyes of financiers and when developing countries borrow money, they must pay much higher interest rates.
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TO REFLECT
“There are people who are capable of losing everything as long as they don’t hurt their ego.”… personal reflection.
“You absolutely need habits to function. You cannot solve every problem in life as if it were the first time it was presented to you”… Naval Ravikant.
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