The Jubilee Debt Campaign treats us to some horribly misleading numbers today. The easiest way to explain this being to show how the UK would be faring under their system of measurement. They say that poor countries are using some ghastly fraction of government revenues to repay debt. Which, they way they’re counting, some of them are. But what we want to know is not that percentage in isolation, but how much is that compared to what?
Debt repayments by the world’s poorest countries have doubled since 2010 to reach their highest level since just before the internationally organised write-off in 2005, campaigners have warned. The Jubilee Debt Campaign (JDC) said a borrowing spree when global interest rates were low had left many developing nations facing repayments bills that were forcing them into public spending cuts. Plunging commodity prices, a stronger dollar and rising US interest rates had combined to increase debt repayments by 85% between 2010 and 2018, the JDC said.
In more detail:
Figures released today by the Jubilee Debt Campaign, based on IMF and World Bank databases, show that developing country debt payments increased by 85% between 2010 and 2018. The new analysis from Jubilee Debt Campaign shows that average government external debt payments across the 124 developing countries for which data is available have increased from 6.6% of government revenue in 2010 to 12.2% of government revenue in 2018, an increase of 85%. This is the highest level since 2004, when such payments were 13.8% of government revenue (see graph below). This rapid increase comes after a lending boom driven by low global interest rates. External loans to developing country governments more than doubled from $191 billion per year in 2008 to $424 billion in 2017 (the latest year with figures available).
OK. So, now, compared to what?
As of Q1 (the first quarter of) 2018, UK debt amounted to £1.78 trillion, or 86.58% of total GDP, at which time the annual cost of servicing (paying the interest) the public debt amounted to around £48 billion (which is roughly 4% of GDP or 8% of UK government tax income).
OK, Some borrowers have got into trouble – Venezuela, Zimbabwe, say, by government killing the economy. Mozambique by some of the government just stealing the money. Well, OK, that’s going to happen in sovereign states from time to time.
As to the general outlook the average isn’t far off what the UK itself is doing. You know, that place where we’re all told the government should be borrowing more to stave off austerity?
Thomas Sowell’s question. “Compared to what?” is an always interesting one, isn’t it?