1. A New Debt Crisis in the South?

2. ‘Third World’ Debt Crisis
External debt in the global South

3. Impacts: In 1980s Latin America
Population living in poverty increased from 144 million to 211 million
Africa
Population living in extreme poverty increased from 205 million to 330 million

4. The global ‘Jubilee’ campaign

5. HIPC debt cancellation from mid-2000s5

6. Conditions to get debt cancelled
Tanzania had to privatise water system, which failed a few years later
Malawi had to sell off grain reserves, year before food crisis
Zambia had to privatise bank, overturning a parliamentary vote

7. Some debts cancelled
$130 billion cancelled for 36 countries; debt payments fallen by three-quarters
Spending on healthcare increased from 5 per cent of national income to 7 per cent
Children enrolled in primary school increased from 6 in 10 in 1990 to 8 in 10 by 2010

10. Global South debts increasing again

11. Lending boom causes
‘Quantitative Easing’: Low interest rates and abundance of money in Western world following global North financial crisis = more interest and desire to lend to the South
New lenders such as China
Northern donors shift more into loans, eg, from the World Bank (including climate loans) 11

12. Impacts of boom in nine countries most dependent on foreign lending
Slightly higher growth (4.7% compared to 3.6%)
But in five of the nine, number of people living in poverty (World Bank definition) had been increasing
Inequality increasing in all nine
Staying just as dependent on commodity exports 12

13. Commodity dependence has increased13

14. Money in and out of Africa

15. Shocks and crisis 15

16. Since 2014: dollar increase in value16

17. Currency depreciations since start 2015
Ghanaian Cedi: Down 39% against the dollar
Mozambique Metical: Down 49% against the dollar
Tanzanian Schilling: Down 28% against the dollar
Zambian Kwacha: Down 46% against the dollar 17

18. Impact now Large currency falls across many countries
Increases in debt and debt payments
IMF adjustment programmes: Ghana, Guinea, Liberia, Malawi, Mali, Niger Rwanda, Sierra Leone Mozambique (suspended) Zambia (expected soon) 18

19. Changes in GDP & External Debt since 201319

20. Debt today 20

21. Countries in or at risk of debt crisis

22. Countries in or at risk of debt crisis

23. Ghana

24. Ghana’s rapidly increasing debt24

25. Who Ghana’s debt is owed to25

26. Interest cost of Ghana’s debt
Interest rates: Eurobonds and other private external: 7.9% % Cedi debt: 7% (average real interest rate) Other governments: 4.5% estimated
Multilateral institutions: 0% - 2% 26

27. Projected Ghana government external debt payments27

28. Assumptions for sustainability
IMF view that external debt is sustainable based on assumptions:
$GDP growth averaging 8.2% a year until 2035
Government $ revenue grows in line with GDP
A fall in average interest rate on external debt from 5.1% to 4.1%
Continual primary budget surpluses 28

29. Real government spending projected to fall29

30. External bond refinancing could be difficult
Most recent Eurobond autumn 2015:
$1bn borrowed at 10.75%
But World Bank guaranteed $400m
This implies cost would have been 16.25% without guarantee
As long as government keeps paying interest until 2025, lenders will have made a profit 30

31. Mozambique

32. Mozambique

33. Mozambique and the hidden debt33

34. Mozambique and the hidden debt34

35. Mozambique and the hidden debt
$726.5 million Eurobond: issued through Credit Suisse and VTB Bank in English law, London branches. Not approved by the Mozambique parliament.
$597 million direct loan: 81% of the loan was from Credit Suisse, 19% VTB. English law, London branches. Not approved by the Mozambique parliament.
$535 million direct loan from VTB. English law, London branches. It is now thought to be in default. Not approved by the Mozambique parliament. 35

36. Mozambique and the hidden debt

37. Mozambique and the hidden debt37

39. A New Debt Crisis in the South?