Global debt on the rise, Africa hit hardest | News | DW | 03.04.2019
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Global debt on the rise, Africa hit hardest

Debt has been rising around the world and according to a new report, the trend is unlikely to stop anytime soon. Some African countries are so indebted that they don't even bother trying to service their debt anymore.

The "Debt Report 2019," presented by Jubilee Germany in Berlin on Wednesday, paints a dark picture of global debt. The organization, which is comprised of civic and church groups, is engaged in efforts to end the problem.

The report claims that low interest rates and cheap credit are motivating poorer countries to borrow beyond their means, catching them in a debt trap they will never be able to escape from.

Read more: Global Wealth Report: The rich still getting richer

Of the 154 countries that Jubilee analyzed, it found 122 to be critically indebted, three more than in 2017.

The organization has called for debt moratoriums and even debt relief for the most indebted countries, as well as an international bankruptcy plan. Furthermore, it is calling for a public register listing each country's debt, their creditors and the cost of servicing that debt.

Speaking in Berlin, Klaus Schilder of the Catholic aid organization Misereor said "the situation is truly dramatic."

Watch video 01:44

The real cause of Mozambique’s huge debt

Mozambique's tragic example

Schilder used Mozambique as an example of what can happen to countries burdened by debt when catastrophe strikes. Mozambique was hit by a cyclone following a surge of floodwaters in mid-March, yet because of its dire financial straits, it does not have sufficient funds to help the 1.85 million people affected by the devastation.

Asian countries such as Mongolia and Bhutan and some countries in the Middle East such as Bahrain and Lebanon carry high debt, but the report says that Africa is the continent hardest hit by the crisis.

Almost every African country is heavily indebted, with the report listing the situation in several countries as critical or very critical.

Angola, The Gambia, Eritrea, Sao Tome and Principe, Somalia, South Sudan, and Sudan are in such dire straits that they have simply stopped servicing their debts.

Although corruption is one cause of debt, the report directly points a finger at predatory lending practices.

Read more: Africa's debt crises not the fault of creditors alone

Watch video 01:41

China bankrolls Ivory Coast port modernization

'China isn't the bad guy'

Although China often gets a bad rap for creating debt traps when financing infrastructure projects, Jubilee came to Beijing's defense.

From 2000 to 2017, China extended some €143 billion ($161 billion) in credit to African nations and businesses, but Jürgen Kaiser of Jubilee said: "China isn't the bad guy." He also noted that China had written off substantial debts in the past.

The report made clear that the far bigger problem of predatory lending was posed by institutions such as the World Bank or European development funds.

"Initiatives like the 'Compact with Africa,' created while Germany held the presidency of the G-20, can also pose very high debt risk depending on which financing model is employed," according to Misereor's Klaus Schilder.

The German government is currently planning a new billion-euro African investment fund.

Ultimately, Schilder said, it is citizens who suffer when countries fall into debt: "When a large portion of a country's budget goes toward servicing debt it becomes impossible for governments to govern — and they can't allocate adequate funds for sectors like health and education."

Watch video 01:30

Developing countries face debt collapse

Daniel Pelz contributed to this story.

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