Malawi alongside other 53 low- and lower-middle income countries are trapped in debt crisis, a situation ActionAid says has forced the economies to cut spending on basic public services and climate action.
This, according to a new report ‘Who owes who?: External debts, climate debts and reparations in the jubilee year published on Monday, has come about as more money is being spent on external debt service, sacrificing health, education, people’s rights and sustainable national development to satisfy their wealthy creditors.
ActionAid said this is coming amid growing consensus that there are a series of historic, practical or moral debts that rich countries owe, whether related to climate change, colonialism, slavery, illicit financial flows or failures to meet established aid commitments, agreed at the United Nations.
Reads the Action Aid report in part: “Even if we were to start calculating the impact of emissions only from as late as 1992 [the date of the UN climate convention], $107 trillion is owed in total to low and lower-middle income countries. That is more than 70 times greater than the total external debt of $1.45 trillion that these countries collectively owe and are forced to pay.
“If the climate debt of rich polluting countries was paid back by 2050 [which seems reasonable given the urgency of climate action] it would involve transferring $4 trillion per year to low-and lower-middle income countries, far greater than the $107 billion that these countries are forced to pay annually.”
ActionAid said African nations will pay $60 billion in debt repayments in 2024, while rich nations should be providing $1.4 trillion annually in climate finance.
ActionAid data show that looking at emission from 1992, Malawi is owed $750 billion by rich countries based on historic and projected atmospheric appropriation.
According to the data, as a percentage of national revenue, external debt payments stand at 25 percent while health spending is at a meagre 5.76 percent in 2024.
This is happening in the face of a formal commitment by rich countries to pay $100 billion a year in climate finances to countries in the Global South which was agreed under the Paris Agreement in 2015.
In 2024, this climate finance target was increased at CoP29 to $300 billion a year, but ActionAid said this still failed to specify that this must be in the form of grants, not loans.
In a collective statement, ActionAid country directors in Africa observed that many African countries are in debt crisis or at significant risk of debt crisis due to an unjust global economic system and extortionate interest rates charged on loans, an average of 9.8 percent in Africa, compared to the average of 0.8 percent for Germany.
“Servicing these external debts and complying with conditions attached to IMF loans, is undermining spending on health, education, and climate action, particularly impacting women,” reads the statement in part.
By July this year, Malawi’s public debt stock peaked to K15.1 trillion.
Minister of Finance and EconomicAffairs Simplex Chithyola-Banda is on record having said the country’s public debt is unsustainable.
