In an era of extraordinarily low interest rates, many countries borrowed beyond their means. Irresponsible lending on the part of creditors and mismanagement on the part of debtors led to a global recession that caused millions of people to lose their jobs, homes and savings. This was the deepest global financial crisis since the Great Depression. While the policy response prevented a global depression, the recession left a lasting impact on the world’s poorest nations.
The international community reacted by offering limited debt relief to some developing countries through the Heavily Indebted Poor Countries Initiative in 1996. This was linked to economic restructuring (often known as Structural Adjustment Programs) that required the borrowing country to make difficult trade-offs: reducing inflation, lifting price controls, cutting back on import subsidies, lowering tariffs, and implementing structural reforms.
Almost half of the debts owed by lower-income countries today are to private lenders like banks, hedge funds and traders. These investors see lower-income countries as an opportunity to earn large profits by charging sky-high interest rates on loans to these countries. This often forces them to cut public spending and investments in education, health care and infrastructure.
PIH’s advocacy team, led by Joel Curtain and Chloe Dahleen, is ramping up efforts to champion legislation and policy change-both within the United States and globally-to address the predatory lending practices that keep dozens of countries locked in an endless cycle of debt and prevent them from investing in social services like health care. Learn more about what is happening, and how you can take action to change the system.
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