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What does the global debt crisis mean for the EU Global Gateway?

April 27, 2023by Anrike Visser

First published by EUobserver

“With 60 percent of African countries spending more on debt repayment than on national healthcare, the EU should use Global Gateway financing to address structural issues rather than conversations about finance.

While the EU debates what constitutes acceptable debt ratios among member states, questions arise about unsustainable debt in developing countries and what it might mean for the EU’s Global Gateway project.

The details of the new fiscal rules for the EU are undecided, but the Member States do seem to agree that debt of more than 60% of GDP triggers a mandatory debt reduction clause. If the same rules would be applied to loans to Africa, the international monetary system would come to a grinding stop.

In 2022, public debt in Africa reached 65% of GDP doubling since 2010. Currently, seven African countries face debt distress and 13 are at high risk of debt distress per the latest Debt Sustainability Analysis from the International Monetary Fund (IMF) and the World Bank dated 28 February 2023. In acute distress are the Republic of Congo, Malawi, Mozambique, Somalia, Sudan, Zambia and Zimbabwe.

Overall, a staggering 60% of all low-income countries face high risks of debt distress or are already there. And the numbers continue to grow.

At the same time, the COVID-19 pandemic and economic downturn following the war in Ukraine have only increased the need for finance. Ahead of the World Bank and IMF annual spring meetings, the UN Secretary-General called for an extra stimulus of at least $500 billion per year or risk missing the Sustainable Development Goals by 2030.

The dichotomy of debt and development is clearly shown in government spending in developing countries. In 2019, 60% of African countries were spending more on debt repayment than on national healthcare.” […]

Read the full article at EUobserver.

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