1 June 2010
A recent IMF report titled ‘Preserving debt sustainability in low-income countries in the wake of the global crisis’ has highlighted the impact of the financial crisis on the debts of the poorest countries. The IMF stalled short of predicting a ‘systematic debt crisis’ however did so on the basis of optimistic assumptions around good growth recovery in the world economy and fiscal austerity by affected Governments.

Particularly significant is the fact that some of the countries where debt sustainability is of most concern are those who have been through the HIPC process, such as Burundi and Burkina Faso, thus demonstrating the clear limitations of the debt relief programs implemented so far. It is perhaps no surprise that the financial crisis has severely impacted upon debt sustainability given that through 2009 aid lending was up a massive 20.6% while grants rose by just 4.6%. The IMF alone lent $2.7 billion through 2008/09, which is in fact greater than the figure that they have granted in debt relief ever since the famous Gleneagles summit in 2005 thus effectively wiping out that progress in just two years. It is clear that debt relief did not go wide and far enough, significant structural barriers still remain preventing fiscal autonomy in developing countries and it seems that this situation is being further compounded rather than addressed.

Click here to read the original article at the EURODAD website.

Click here for the IMF report.