A sharp increase in lending to sub-Saharan African countries could leave many with crippling debts over the next decade, a new report has warned.

The UK-based Jubilee Debt Campaign said that current rates of lending “could lead to debts becoming unsustainable in many impoverished countries over the next decade.”

Based on analysis of International Monetary Fund and World Bank data, the Jubilee Debt Campaign has found that two-thirds of impoverished countries face large increases in the share of government income spent on debt payments over the next 10 years.
On average, current lending levels will lead to increases of between 85 per cent and 250 per cent in the share of income spent on debt payments, depending on whether economies grow rapidly or are impacted by economic shocks.

Even if high growth rates are achieved, a quarter of impoverished countries would still see the share of government income spent on debt payments increase rapidly, Jubilee said.

“There is a real risk that today’s lending boom is sowing the seeds of a new debt crisis in the developing world, threatening to reverse recent gains in the fight against poverty and inequality,” Sarah-Jayne Clifton, director of the Jubilee Debt Campaign, said.

“The shocking thing is that public bodies like the World Bank are leading the lending boom, not just reckless private lenders hunting for returns.”

“The $130 billion of debt cancellation agreed in the 2000s has given countries in Africa and Latin America valuable breathing space to spend scarce government funds on fighting poverty and providing essential public services. But the failure to reform the global debt system so that the root causes of debt crises are addressed means history may be set to repeat itself.”

Tanzania is the East African country with the highest level of current repayments on debt as a proportion of GDP at 27 per cent, while Ethiopia stands at 25 per cent, Kenya at 14 per cent, Rwanda 6 per cent and Uganda 3 per cent. These figures are based on 2012/13 statistics.

Around 50 per cent of current lending to sub-Saharan Africa is from multilateral institutions such as the IMF, World Bank and African Development Bank, with 33 per cent from other governments such as China and 17 per cent from the private sector.

Coinciding with the World Bank’s annual meeting in Washington, the anti-poverty campaigners accuse the international lender and other public bodies of “leading the lending boom” to poor countries without checking how repaying the debts will divert resources from cutting poverty.

Total lending to poor developing countries has increased by 60 per cent from $11.4 billion a year in 2009 to $18.5 billion in 2013. The report highlights that despite the rise in lending, government revenues are not rising to keep pace with repayments.