Developing countries are struggling with steep rises in their debt payments after being hit by a double whammy of lower commodity prices and a stronger dollar, with more pain to come once the US central bank raises interest rates this week, campaigners warn.

The Jubilee Debt Campaign said that some of the world’s poorest countries have seen the cost of repaying their debts – as a proportion of government revenue – hit the highest level for a decade. Government coffers have been depleted by lower revenues from commodity exports and the size of dollar-denominated debts has risen as the US currency has strengthened.

The dollar has risen more than 6% against a basket of other big currencies over the past six months as investors anticipate that big spending plans by President Donald Trump will boost US growth and that the US Federal Reserve will follow up December’s interest rate rise with more increases this year.

After the latest US jobs numbers on Friday beat expectations, a rate rise from the Fed’s policymakers when they meet this Wednesday is seen as imminent among investors.

That would further increase the cost of debt payments for poor countries, which have taken out big loans in recent years from western countries where interest rates have been low, said the Jubilee Debt Campaign.

Tim Jones, economist at the campaign group, warned the rising cost of debt payments was putting developing countries under extra strain just when they needed to be spending more money at home to meet the UN sustainable development targets – a series of goals for human development intended to be achieved by 2030.

“The rapid increase in debt payments in many countries comes after a boom in lending, a fall in commodity prices, the rising value of the US dollar and now increasing dollar interest rates,” said Jones.

He warned there was a danger that loans from the International Monetary Fund (IMF) and other lenders would be used to bail out “reckless lenders” who were at risk of not getting repayments from crisis-hit countries. That would lead to year of economic stagnation, just as in debt-laden Greece, Jones added.

“Instead, reckless lenders should be made to shoulder some of the costs of recent economic shocks by accepting lower payments,” he said.



Analysis by the Jubilee Debt Campaign showed that average government external debt payments across the 122 developing countries for which data is available have increased from 6.7% of government revenue in 2014 to 9.7% in 2016. That is the highest level since 2007.

It used IMF and World Bank databases to calculate how a fall in commodity prices since mid-2014 had depleted government revenues and how the strengthening dollar had raised payments on external debts, which tend to be owed in dollars.

The analysis found countries with the highest debt payments in 2016 included commodity producers such as Ghana, Mozambique, Angola, Laos and Chad as well as countries on the frontline of refugee flows from Syria, including Lebanon and Jordan.