Addressing Debt Crises, Healthcare Access, and the Pandemic

Most developing countries continue to wrestle with dramatic health and economic crises spurred by the coronavirus pandemic. Many countries were and still are ill-prepared to deal with the pandemic because of debt crises and unsustainable sovereign debt.¹ As African countries struggle with debt, as of mid-2022, only 15 percent of the continent was fully vaccinated against COVID-19 according to the World Health Organization.²

This essay examines the impact of high sovereign debts on healthcare in developing countries. As a civil society advocate, I have monitored how countries’ debts weakened healthcare systems prior to the pandemic and left developing countries with limited resources to provide healthcare and respond to the pandemic. While developing country social infrastructure and health systems are subject to a range of structural threats from corruption to the effects of austerity, unsustainable debt exacerbates most threats these countries face.

The Pre-pandemic Status of Health and Debt in Developing Countries

Even before the pandemic, the annual death rates of children from preventable diseases in developing countries were staggering. An unfortunate reality in 2018 was that 6.2 million adolescents and children under 15 years old died, including 5.3 million deaths under the age of five. The United Nations asserts most of these deaths were preventable.³

Prior to the pandemic, a fifth of developing low and middle-income countries spent more on debt than healthcare, social protection, and education combined.⁴ In 2019, South Sudan spent more than eleven times the amount of money on debt payments than it did on these social services.⁵

According to the World Bank, from 2010 to 2018, developing country debt soared in one of the greatest historical increases. On average, debts rose by 12 percentage points of GDP to 50 percent of GDP.⁶ By 2019 half of the seventy-three countries that would later qualify for a G20 pandemic debt payment suspension initiative were facing debt crisis or could no longer fully pay their debts.⁷ In 2018, forty-six countries spent more on public debt service than on healthcare as a percentage of their GDP.⁸ Before the pandemic hit, high debts had pushed far too many developing countries to underinvest in healthcare.

Debt Relief Historically Increased Healthcare Access and Social Protections

Lessons from previous debt relief initiatives provide several avenues for addressing the current pandemic-related health crisis in developing countries. Unfortunately, the story of high debt payments and the inability to provide healthcare, education, and social infrastructure is a story that is all too familiar for many developing countries.

As early as the 1990s, some of the world’s poorest countries were spending more on debt payments than they were spending for healthcare and education.⁹ Children were suffering from malnutrition and dying of starvation while developing nations paid the principal of loans many times over. A popular adage at the time was “debt means death.”

In 1998, Pope John Paul II asserted that the “heavy burden of external debt . . . compromises the economies of whole peoples and hinders their social and political progress. The debt question is part of a vaster problem: that of the persistence of poverty, sometimes even extreme, and the emergence of new inequalities which are accompanying the globalization process.”¹⁰

Inspired by scripture, faith, and a moral imperative to end poverty, religious and advocacy groups called for relieving debt and addressing the structural causes of poverty. Many of these organizations from across the world came together under the banner of Jubilee 2000. In the United States, Christian, Jewish, Muslim, and secular development groups coalesced in what would ultimately become Jubilee USA Network.¹¹ As a result of Jubilee advocacy, the U.S. government and global leaders provided $114 billion in debt relief to numerous developing countries to be reinvested in social infrastructure, healthcare, and education.¹² One of Jubilee USA’s founding development organizations, American Jewish World Service, summed up the impact of debt relief and the ensuing investments in developing countries: “Because debt payments often must take precedence over spending on education, health care and other basic necessities, debt cancellation can have a huge impact.”¹³

In the early and mid-2000s the Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative were enacted so developing countries could invest their debt payments into strengthening education, healthcare, and social service in the developing world. As a result of the debt relief initiatives, debt service to GDP went down nearly 2 percentage points and education, health care, and poverty reduction investments rose by 10 percent.¹⁴

Nonetheless, many developing countries would struggle to fund basic healthcare services despite these initiatives. When the Ebola epidemic struck West Africa in 2013, many of the countries it affected were countries whose healthcare budgets were already strained. Low healthcare spending worsened the epidemic over the course of nearly three years and led to unnecessary loss of life. In 2012, the year before the epidemic began, Guinea—where the outbreak started—had spent more money on debt than on public health.¹⁵ The negative effects of reliance on borrowing and high levels of debt for these countries were compounded by other structural economic losses. Guinea, Sierra Leone, and Liberia lost an annual combined average of $1.3 billion to tax evasion, corruption, and illicit financial flows in the years prior to the Ebola pandemic.¹⁶ From 2002 to 2006, Guinea lost an estimated 16 percent of its budget to just one form of illicit flows: trade mis-invoicing.¹⁷ Amid revenue shortfalls and additional losses from illicit financial flows, in 2012, the three countries spent just under $300 million on public health and nearly $175 million on debt.¹⁸ At the time, Liberia was ranked 175th out of 187 countries in the United Nations Human Development Index. Guinea ranked at 179th and Sierra Leone was 183rd.¹⁹ Thus, corruption and illicit financial flows mean that these countries lose critical revenues and must take out more loans to compensate. Further, the revenue loss means that resources are not available to pay debt and contributes to unsustainable debt.

In the face of the Ebola epidemic, development and religious organizations called once again for debt relief so these countries could fight Ebola and develop greater healthcare infrastructure. As a result, the IMF created the Catastrophe Containment and Relief Trust that resulted in $100 million in debt relief to support healthcare in the three Ebola affected countries.²⁰

Looking back at the consecutive debt, social, and health crises that occurred in certain developing countries from the 1990s through 2016, we can see that high unsustainable debts contributed to countries being under-prepared to adequately deal with social needs and unable to respond to public health crises. Even faced with great social challenges, countries continued to pay more on debt than health and other vital social services. When debt relief was mobilized, it had immediate positive impacts on healthcare, education, and poverty reduction.

The Pandemic Further Disrupts Healthcare in Developing Countries

The underinvestment in healthcare, combined with unsustainable debts, created conditions that heightened and worsened the shocks of the global Covid-19 pandemic. A year into the pandemic the World Health Organization surveyed 135 countries to find that 90 percent struggled with disruptions to essential health services.²¹ Due to pandemic-related food shortages and economic crises, 118 low and middle-income developing countries saw child mortality increase to 45 percent, according to World Bank estimates.²²

Based on information from eighteen countries in Latin America and the Caribbean, the Atlas of Vulnerability reports most countries showed excess mortality of more than 10 percent, with six countries exceeding 50 percent.²³ While to a certain degree child mortality may reflect COVID-19 caused deaths, the broader reason for increased child deaths is likely due to the increased strain placed on developing healthcare systems as a result of the coronavirus crisis. In Africa, for example, the ongoing fight against tuberculosis faltered because of COVID-19 related challenges for health systems.²⁴

In addition, countries in the developing world have lacked and continue to lack resources to vaccinate their populations and combat the pandemic. The need for additional resources to confront a new health crisis has put further pressure on already strained health systems.²⁵ The International Monetary Fund estimated that vaccinating 60 percent of the developing world's population by mid-2022 and ensuring testing and therapeutics would cost $50 billion.²⁶ Other estimates were as high as $63 billion.²⁷

The pandemic has unquestionably placed reaching United Nations Sustainable Development Goal 3, focused on healthcare, even further out of reach. An annual investment of $307 to $416 billion is needed to “ensure healthy lives and promote well-being for all at all ages," as the goal puts it.²⁸ As the World Bank estimates developing country debt reaching levels north of $8.7 trillion, the billions needed to reach the healthcare goals could be achieved through debt relief.

At the same time, public health experts are sounding a global alarm on preventing future pandemics. A high level G20 report on pandemic preparedness argues that significant investments are needed by all countries in order to prevent or address future pandemics. Among other things, it recommends that developing low and middle-income countries should allocate 1 percent of their GDP to their health budgets over the next five years. And collectively, it recommends that all governments should commit to increasing international pandemic prevention aid and financing by a minimum of either $75 billion one time or $15 billion per year over five years.²⁹

Pandemic Debt Relief Initiatives

Some pandemic debt relief and payment suspension initiatives have offered a degree of support to confront the pandemic. The Catastrophe Containment and Relief Trust, which assisted the Ebola-affected countries, provided nearly thirty of the world's poorest countries temporary debt payment forgiveness during the first two years of the pandemic. Another program launched by the G20, the Debt Service Suspension Initiative (DSSI), allowed forty-eight out of seventy-three eligible countries to temporarily pause debt repayment. The program created some space for countries to invest more in pandemic response and healthcare.³⁰

A broader G20 program under early implementation, the Common Framework for Debt Treatments beyond the DSSI, could offer more relief for seventy-three countries. Potentially, the program could allow countries to invest more in healthcare and offer deep debt restructuring to ensure that debt loads are sustainable. That said, the Common Framework's implementation is confronted with the same questions that have plagued debt and debt relief initiatives since the early 2000s. Most importantly, it must contend with the question of what sustainable debt actually means. Is debt considered sustainable, or payable, if it requires cuts to healthcare and social needs? Or can the Common Framework not only protect critical social expenditures but also, through debt relief, provide resources to bolster health, education, and anti-poverty initiatives?

The questions regarding debt sustainability and social protections will ultimately be answered by evaluating whether countries receive enough relief to invest in and strengthen health services. To date only three of the seventy-three countries eligible for the Common Framework initiative have applied: Zambia, Ethiopia, and Chad.³¹

One specific measure to evaluate the success of the Common Framework, will be to look at child mortality rates in the countries applying for the Common Framework. In June of 2020, the government of Zambia reported on its progress achieving the Sustainable Development Goals. Regarding Goal 3, focused on health, the Zambian government found a key challenge to be “persistent inequality in service delivery, especially for rural communities and disadvantaged groups.”³² The report highlights that more rural areas have child births attended by skilled providers 70 percent of the time while some urban areas see skilled providers over 90 percent of the time. Accessibility and delivery issues come into sharper focus where we see the contrast of one province with more resources recording 26 deaths per 1000 live births while the poorer, northern Luapula Province struggles with 110 deaths per 1000 live births.³³ If the Common Framework successfully delivers relief and restructures debt, debt sustainability should ensure delivery of service is strengthened and child mortality should be reduced.

Are Current Debt Relief Initiatives Enough to Address the Pandemic?

While pandemic debt relief initiatives have helped, they are inadequate to fully address the pandemic in developing countries or to strengthen healthcare to deal with future crises.

With at least $50 billion needed to hit global COVID-19 vaccination targets, another $75 billion to prevent and contain future pandemics, and trillions to meet the 2030 global healthcare goals, a massive financial mobilization is urgently needed. Debt relief is a key part of the answer to reaching these goals. According to the World Bank, the debt stocks of all low and middle-income developing countries stand at $8.7 trillion. Low-income countries alone hold $860 billion in debt.³⁴

In terms of the Common Framework adequately providing enough relief, the sausage is still being made. At this point the G20 initiative does not include all developing countries. Whether or not a functioning Common Framework could do so, some kind of institutionalized, fair, timely, and comprehensive process will be needed to cut debt in order to reinvest in social needs. A number of prominent world leaders are calling for quicker creation and implementation of the Common Framework as the International Monetary Fund and World Bank warn of a coming wave of pandemic-spurred sovereign debt defaults.³⁵ Recent G20 meetings which focused on debt relief and restructuring failed to describe the implementation processes for the framework.³⁶

With continuing debt crises, the pandemic, and the required investments counted in the trillions for all people to access healthcare, further debt relief and a permanent comprehensive debt restructuring process is still needed.

One option for countries to be relieved of debt comes from an old source, Adam Smith, the father of modern economics, who advocated for a sovereign country bankruptcy process. He stated, “When it becomes necessary for a state to declare itself bankrupt, in the same manner as when it becomes necessary for an individual to do so, a fair, open and avowed bankruptcy is always the measure which is both least dishonorable to the debtor, and least hurtful to the creditor.”³⁷ Similarly, in July 2015 Pope Francis quipped to the Vatican press core, “if a company can declare bankruptcy why can’t a country do it and we go to the aid of others,” in reference to Greece's crisis and a possible United Nations process for sovereign debt workouts.³⁸ A few months later in September of that year, Pope Francis addressed the United Nations General Assembly in New York as the body was debating a bankruptcy process. Francis asserted that debt processes, “...should care for the sustainable development of countries and should ensure that they are not subjected to oppressive lending systems which, far from promoting progress, subject people to mechanisms which generate greater poverty, exclusion and dependence.”³⁹

As a part of the UN General Assembly process that approved bankruptcy, but failed to implement the framework, the United Nations Conference on Trade Development laid out how global bankruptcy could work. “Sovereign Debt Workouts: Going Forward Roadmap and Guide” explored the lessons from domestic bankruptcy processes and implementation of a global bankruptcy framework that would secure social protections, such as adequate healthcare.⁴⁰

Since the 1990s we have seen consecutive debt and financial crises in developing countries, regions, and even globally. In the face of each crisis policymakers have failed to implement holistic and comprehensive processes to fully address those crises or prevent future ones. Instead, there has been some relief and financing that was helpful but piecemeal. The pandemic highlighted a variety of staggering inequities worldwide, including in global access to healthcare. High debt burdens weakened health systems in the developing world before the coronavirus crisis and countries lacked resources to respond to the pandemic. To address the pandemic, prevent future crises, and establish stronger health systems in developing countries, a permanent and comprehensive debt relief process is a vital part of the solution.

—Eric LeCompte

Eric LeCompte is the executive director of Jubilee USA Network.