Growing debt burdens hinders the fiscal capabilities of developing countries for whom additional debt often means reduced government spending in the public sector. Given the impacts of climate change, the consequences could be further exacerbated by worsening climate conditions. How can we achieve climate justice?
At the onset of COVID-19, governments in developed countries were able to provide financial support to mitigate the worst economic effects of the pandemic. For sub-Saharan Africa, World Bank data showed that the average daily median household income dropped by over 11 per cent; from 2.55 dollars a day to 2.2 dollars. It is also worth noting that these figures were projected to plummet by 7 per cent due to severe economic conditions. As such, the pandemic only worsened a poverty crisis brought about by a legacy of poor fiscal discipline and harsh austerity policies.
Many countries in sub-Saharan Africa are indebted to global powers and institutions, having amassed significant budget deficits ahead of the pandemic. This hampered their ability to procure urgent financing needed to respond to COVID-19. In response to these fiscal difficulties, the World Bank and the International Monetary Fund provided a debt moratorium called the Debt Service Suspension Initiative. The initiative, introduced in May 2020 and expired in December 2021, was designed to allow countries hamstrung by the pandemic to procure additional loans. For example, Nigeria secured a $3.4 billion loan.
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