Paradise for Human Victims of Corporate Persons
Any day now, Zambia will be the first African country to slip into a private debt default. It can only pay interest on the $3 billion in dollar-denominated bonds if it totally ignores the needs of the Zambian people. The country has suffered from the slowdown of the world economy, which impacted the sale of its copper for a part of this year (although copper prices and future prices have now begun to rise).
Cosmas Musumali, the general secretary of the Socialist Party of Zambia, says that the convulsions of indebtedness are not only due to the coronavirus recession but also to the wealthy bondholders and to the “cluelessness” of the government of President Edgar Lungu of the Patriotic Front.
Zambia is one instance of what will be a cascade of defaults. The International Monetary Fund estimated in April 2020 that at least 39 million people in sub-Saharan Africa will be forced into extreme poverty. Ken Ofori-Atta, the finance minister of Ghana, said in early October that “The ability of central banks in the west to respond [to the pandemic] to an unimaginable extent and the limits of our ability to respond are quite jarring.”
Ofori-Atta’s comment should be taken very seriously. In its October 2020 “Fiscal Monitor Report,” the IMF said that governments around the world have thus far spent or cut taxes to the tune of $11.7 trillion or 12 percent of global GDP.
Through low interest rates, financial institutions are encouraging governments in Europe and in North America to borrow money to exit the coronavirus recession. The IMF’s Managing Director Kristalina Georgieva regularly says that countries must “spend. Keep the receipts. But spend,” and that this expenditure should go towards infrastructure.
The World Bank’s Chief Economist Carmen Reinhart has said that even developing countries must take on new debt: “While the disease is raging, what else are you going to do? First you worry about fighting the war, then you figure out how to pay for it.” To people like Ofori-Atta and Musumali, this is strange advice.
Developing Country Debt
In November 2019, before the pandemic, Stephanie Blankenburg gave a presentation at the Debt Management Conference of the United Nations Conference on Trade and Development (UNCTAD). As the head of the Debt and Development Finance Branch of UNCTAD, Blankenburg keeps a keen eye on the escalation of debt and its social impact. “Developing country external debt,” she said, “surpasses combined export earnings since 2016.”
The World Bank’s “International Debt Statistics 2021” shows that at the end of 2019, the total external debt of the developing countries was over $8 trillion.