By Collins Olayinka, Abuja
04 September 2023
A combination of rising interest rates and lack of sufficient affordable capital from the World Bank is increasing economic pressures on vulnerable countries already at high risk of debt distress, a report by ONE Campaign has shown.
ONE’s research shows that borrowing from capital markets is costing African countries 500 per cent of what they would pay if sufficient capital were available from the World Bank.
It says this could result in African countries paying an additional $56 billion in repayment costs on new debt raised between 2017 and 2021.
“With 36 low-income countries already at high risk of debt distress, this affordable capital crisis means that a growing number of low- and low-middle-income countries will be unable to turn crisis-hit economies around, invest in vital services such as health and education, or respond to the climate crisis,” the report says.
ONE’s analysis also shows that a lack of affordable capital will impact the whole world. Africa alone possesses vast renewable energy resources and carbon capture potential that could fuel its economic growth and transform global efforts to tackle climate change, but this potential cannot be realised without access to affordable capital.
In his comment on findings of the report, the Chief Executive of ONE Campaign, Gayle Smith, said: “It makes neither political nor economic sense that low- and low-middle income countries are being forced to pay premium prices for capital at the very moment they are trying to recover from the pandemic, deal with the fallout from Russia’s invasion of Ukraine, and respond to growing threat from climate change.
“It is even more stunning to consider that solutions are at hand if the world’s wealthy and most powerful countries choose to pursue them – solutions that would enable developing economies to recover and grow and would also deliver big-time to a global green energy future.”(GUARDIAN)
