Debt could trap low-income nations in poverty — report

A lasting divide risks emerging between rich and poor countries if the rising debt burden of low-income and emerging nations is not tackled, a report warned.

Countries have responded to the Covid-19 pandemic and the economic crisis by stepping up spending, but trajectories of their debt burdens have diverged as only some nations have benefitted from ultra-low interest rates, a study by credit insurance firm Euler Hermes found.

A decade ago, 6 percent of government spending in both rich and poor nations went to interest on their public debt.

But for advanced economies it fell to around 4 percent in 2020, while for emerging markets it rose to 7.3 percent and for low-income developing countries it shot up to 13.7 percent.

The firm estimated low-income countries will need a minimum of 450 billion dollars to step up their response to Covid-19 as well as maintain their finances to avoid long-term damage to their economies.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.