VATICAN - Foreign debt, a burden that oppresses the poorest Countries

Vatican City (Agenzia Fides) - There are 48 States that spend more on interest payments than on education or healthcare. This is according to the report "A World of Debt" by the UN Trade and Development (UNCTAD). Debt service, i.e., the payment of interest on loans received, thus has a major impact on the lives of the poorest countries, as the funds allocated to education, healthcare, and subsidies for the purchase of basic goods and fuel are cut. The protests that took place in Nigeria and Kenya in 2024, primarily among young people, are closely linked to this debt mechanism. In order to pay the interest and reduce their countries' overall debt, the Kenyan and Nigerian governments had presented financial laws that provided for tax increases and subsidy cuts. During his audience with participants in the conference "Debt Crisis in the Global South" organized by the Pontifical Academy of Sciences on June 5, 2024, Pope Francis said: "In the wake of mismanaged globalization, and in wake of the pandemic and wars, we find ourselves faced with a debt crisis that mainly affects the countries of the global South, causing misery and distress, and depriving millions of people of the possibility of a dignified future." The Pope expressed hope that the Holy Year 2025 will pave the way for "a bold and creative new international financial architecture." The UNCTAD report agrees with Pope Francis when he states: "The global financial architecture is no longer able to meet the needs of the world in the 21st century. This is a major challenge for sustainable development." Therefore, creativity and courage are needed to overcome a financial structure that further widens the gap between rich and poor. According to the UNCTAD report, "Developing countries struggle with an international financial architecture whose deeply entrenched asymmetries exacerbate the impact of successive crises on sustainable development. This system exacerbates their debt burden by limiting their access to finance for sustainable development and forcing them to borrow from more costly external sources." Recent events have exacerbated this challenge. Rising global interest rates since 2022 have further strained developing countries' public finances. High interest payments outpace growth in basic public spending such as health, education, and climate change mitigation. In developing countries, home to 3.3 billion people, one in three countries spends more on interest payments than on these key areas of human development. "Debt service for public external debt totaled USD 365 billion in 2022, corresponding to 6.3% of export earnings. By comparison, the 1953 London Agreement on German war debt limited the share of export earnings that could be spent on servicing external debt (public and private) to 5% to avoid undermining the recovery," states the UNCTAD report, highlighting the different treatment of poorer countries today. It notes, in particular, that 61% of developing countries' debt is held by private creditors who are subject to little political constraint when demanding interest payments. For this reason, the call Pope Francis made on December 16, 2024, during a meeting with representatives of the banking sector, resonates strongly: "The imminent Jubilee reminds us of the need to forgive debts. It is the condition for fostering hope and future in the life of many people, especially the poor. I encourage you to sow hope. Do not tire of accompanying and keeping the level of social justice high." (L.M.) (Agenzia Fides, 6/6/2025)

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