The West’s Anti-Worker Interest Rate Hikes Are Drowning the Global South in Debt
Policymakers in the Global North have mostly responded to rising inflation by raising interest rates. That’s bad for their own workers — and it’s creating a debt crisis for many countries in the Global South.
Vendors sell products in a busy street in Accra, Ghana, on March 21, 2022. (Seth / Xinhua via Getty Images)
At the end of last year, Ghana defaulted on its debt as the government suspended payments on most debts owed to foreign creditors. Earlier in 2022, Sri Lanka also entered default as inflation sent the country’s currency tumbling, exacerbating the cost-of-living crisis as imports of essential goods like food and medicine became more expensive.
This year, Pakistan finds itself on the brink of default as the combination of high inflation and climate breakdown fueled environmental disasters devastated its economy. Pakistan’s situation is particularly worrying given the fact that the country is the world’s fifth largest by population. Other countries like Zambia and Lebanon have been in default for much longer.
High inflation and slow global growth have wracked many poor economies at the same time as rising interest rates have made debt servicing more expensive. Fifteen percent of poor countries are already in debt distress — when a country is unable to fullfil its financial obligations and debt restructuring is required — while half are in danger of entering it.
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