A new study from The ONE Campaign has revealed that the combination of rising interest rates and a lack of affordable capital from the World Bank is increasing the economic pressures on poor countries that are already at high risk of debt distress.
"ONE’s research shows that borrowing from capital markets is costing African countries 500% of what they would pay if sufficient capital was available from the World Bank. 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," said ONE.
ONE’s study also suggested that the insufficiency of affordable capital will impact the whole world.
However, the continent of Africa alone has a large number of renewable energy resources and carbon capture potential that can boost its economic growth and contribute to global efforts to fight climate change, but this cannot happen without being able to access affordable capital.
"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 the growing threat from climate change.
"It’s 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," said the chief executive of the ONE Campaign, Gayle Smith.
Smith added that the G20 says it ‘is the premier forum for international economic cooperation and plays an important role in shaping and strengthening global architecture and governance on all major international economic issues.’ However, that’s a bold statement.
"It’s time for G20 leaders to step up and lead and shape the global architecture and governance on the major issues of the day to serve, indeed, the entire globe," Smith said.
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