Development economics: UK private lenders urged to join relief effort for developing countries

As Boris Johnson takes charge of the G7 summit, campaigners are urging him to ensure UK private lenders (who own 30% of debt of countries under the G20 relief initiative) join international debt relief efforts.

With developing countries struggling to address the crisis of Covid-19, the Jubilee Debt Campaign, who lobby for debt alleviation in less economically developed countries (LEDCs), want private UK lenders to allow heavily indebted countries to restructure their loans to make their repayments more affordable.

The fact that before Covid-19 hit, 64 lower-income countries were spending more on repaying their external debts than they were on healthcare highlights the huge limitations that debt burdens place on economic development. This is a problem that has worsened in recent years, with the proportion of government revenue going towards debt repayments in lower-income countries doubling from 6.7% in 2010 to 14.3% in 2020.

Given the UK's recent commitment to sharing surplus vaccines with developing nations, it will be interesting to see how Boris Johnson will help to address this debt crisis in developing countries. It may be that compelling private investors to take part in a restructuring scheme might just be one step too far for him.

Here's a great video that looks at the relationship between debt and economic development.