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Out of service: How public services and human rights are being threatened by the growing debt crisis

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Out of service: How public services and human rights are being threatened by the growing debt crisis

20th February 2020

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Public services play a critical role in advancing human rights and fighting inequality. However, growing levels of external public debt, especially in the global south, threaten the very services on which citizens depend in order to have even a basic standard of living.

External debt levels are once again increasing and a new wave of debt crises is unfolding. The current trend of addressing debt sustainability problems through neoliberal austerity policies reduces, rather than increases, available economic resources. The resulting budget cuts and promotion of privatisation strategies, along with public-private partnerships (PPPs), ultimately endanger the capacity of public services to advance human rights and achieve the Sustainable Development Goals (SDGs), including women’s rights and gender equality.

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This report takes a closer look at the impact of debt crises on public services and how in impoverished countries in particular there is a negative impact on people’s rights – particularly on the rights of women.  When existing gender inequalities, along with women’s practical and strategic needs and interests, are taken into consideration in public services design, they can help address the barriers women face in a range of sectors and situations. But when resources for public services are not available, achieving gender equality becomes extremely difficult.

A deteriorating debt landscape

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Since 2011, general government gross debt to GDP ratios have increased across all regions in the global south.

This report outlines how: 

  • Between 2010 and 2018, external debt payments as a percentage of government revenue grew by 83 per cent in low- and middle-income countries, from an average of 6.71 per cent in 2010 to an average of 12.56 per cent in 2018.
  • In Sub-Saharan Africa specifically, the proportion of government revenue destined for external debt service payments more than doubled, from 4.56 per cent in 2010 to 10.8 per cent in 2018. Such an increase threatens to undermine gains seen in the region following debt relief under the Heavily Indebted Poor Countries (HIPC) and Multilateral Debt Relief (MDRI) initiatives of the late 1990s and early 2000s.
  • Additionally, at least 20 governments in the global south spent more than 20 per cent of their revenue to service external debts in at least one of the last five years. In some cases, such as in Angola, Djibouti, Jamaica, Lebanon, Sri Lanka or Ukraine, more than 40 per cent of government revenue was destined for external public debt service at some point between 2014 and 2018. Worryingly, in most cases, this is due to an increase in debt payments, rather than a decrease in revenue, and IMF projections do not indicate a reversal of this trend in coming years.

The impact of debt crises on public services and human rights

Under international human rights law, states have a duty to promote social progress and better standards of living, including by allocating sufficient resources to public service provision. Yet, in a global context where a neoliberal approach dominates, austerity measures are being implemented in the name of fiscal discipline and non-debt related government spending has decreased significantly in recent years. As a result, fewer and fewer resources are being allocated to public services. 

This report shows how: 

  • Between 2014-18 resources spent on public services dropped by more than 18 per cent in Latin America and the Caribbean and by 15 per cent in Sub-Saharan Africa. Looking ahead, the International Monetary Fund (IMF) predicts that this trend will continue in all regions.
  • According to these projections, government spending in Sub-Saharan Africa will reach a historic low in 2024, at 20.74 per cent of GDP. In Latin America and the Caribbean spending is projected to fall from 33.74 per cent in 2014 to 29.85 per cent of GDP in 2024. In the Middle East and Central Asia from 32.96 per cent in 2014 to 29.82 per cent in 2024. Meanwhile the IMF predicts debt levels will continue to increase.
  • This is already having a direct impact on basic services such as education or health. In at least 21 low- and middle-income countries, government education expenditure as a percentage of GDP decreased between 2015 and 2017, while debt service as a percentage of GDP was increasing. Similarly, in the 39 countries where data is available, the domestic general government health expenditure per capita decreased between 2014 and 2016, while debt service per capita increased.
  • The impact of austerity measures and, in particular, budget cuts to essential public services, falls more heavily on women and girls. It is mainly women who will carry the extra unpaid burden of the care tasks that public services will eventually stop providing (or as both quality and coverage decrease). Women are concentrated more heavily than men in lower-income sectors of society, thus women are more affected by cuts in social protection programmes and food or energy subsidies, or, for example, by the removal of vital services for survivors of gender violence. Public workers’ wage caps directly impact women’s income and economic security, as the public sector tends to be a major source of employment for women.

A new approach to dealing with debt

If we are to avoid yet another “lost decade” for human rights and development as the new wave of debt crises unfolds, there is an urgent need for IFIs and governments to adopt a new approach to sovereign debt crisis prevention and resolution. One that puts people first and protects their rights over creditors’ profits.

Governments must rise to their obligations under international law, and adopt proactive approaches to embedding human rights and gender equality in public policy-making, including through integrating gender-sensitive human rights impact assessments into policy planning and debt management. Moreover, adopting a more comprehensive approach to assessing debt sustainability, that encapsulates human rights, alongside other social, gender, environmental and development considerations, will be critical to strengthening debt crisis prevention and buffering populations from the impacts of over-indebtedness.

When crisis hits, and debt restructuring becomes unavoidable, delays increase the economic and social cost of restructurings and prolong the timespan during which sovereign debt problems impact negatively on public services. On the other hand, more timely, comprehensive, and efficient restructurings could lead to fairer and more sustainable outcomes.

Eurodad, other civil society organisations (CSOs), and critics have long highlighted the absence of a multilateral sovereign debt workout mechanism to provide this systematic approach to crisis resolution. This report illustrates that as the debt outlook deteriorates across the globe, international efforts to develop and agree upon such a mechanism must be renewed.  In the interim, creditors and IFIs should work to promote more timely and effective restructurings, and cease to promote an orthodoxy that relies on harmful austerity-focused policies and loan conditionalities.

Against the background of a new global debt wave, the erosion of public service expenditure through direct, austerity-driven cuts and rising debt payments is already jeopardising viable routes to achieving the 2030 development agenda, the Beijing Platform for Action on gender equality, and the Paris climate goals. 

The urgency is clear. Now is the time to enact long needed reforms to an international sovereign debt resolution system that is arguably out of service. 

Report by Eurodad

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