Are we heading for another developing world debt crisis? | Larry Elliott

Western bank loans for projects in Africa were to be paid off via rising commodity prices. At least that was the theory…Global interest rates are rising. Poor countries are finding it tough to pay back money borrowed from banks in anticipation of a commodity windfall that never materialised. Stir in some dirty dealing that has seen funds stolen and what do you have? That’s right: the makings of another debt crisis.Poor country debt was supposed to have been sorted back in 2005, the year the Guardian changed from a broadsheet to its Berliner format. Now, 13 years later, we are changing format again and debt is back albeit in a different form. Last time, the focus was on public debt; money that poor-country governments owed to the International Monetary Fund, the World Bank and individual rich nations – and which was mostly forgiven as a result of the Gleneagles G8 agreement in 2005. These days, the issue is private-sector debt and while as yet only a handful of countries – mostly in sub-Saharan Africa – are in serious trouble, the warning signs are there. The IMF and the World Bank both know it. Continue reading...

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