The Guardian’s chief economic editor Larry Elliott published another warning of the financial crash about to come, in “Fears Grow that U.S. Action on Inflation Will Trigger Debt Crisis” (https://www.theguardian.com/business/2022/jan/23/fears-grow-that-us-action-on-inflation-will-trigger-debt-crisis?s=09). Elliott reports on the Jubilee Debt Campaign (JDC) study on the effects that an interest rate increase will have on the already debt-ridden developing sector. According to the JDC, these countries already spent 14.3% of their revenues on debt payments in 2021, up from 6.8% in 2010 and the highest level since 2001. An increase in U.S. dollar borrowing costs will weaken their currencies further.
Elliott continues to report that the World Bank and the International Monetary Fund have called for more comprehensive relief, pointing out that the external debt payments by low- and lower- middle income governments include 47% to private lenders, 27% to multilateral institutions such as the World Bank and the IMF, 12% to China, and 14% to governments other than China.
