Increased debt on the horizon amid Covid-19 pandemic

- Advertisement -

By Elesha George

[email protected]

Small Island Developing States (SIDS) like Antigua and Barbuda have for years been faced with a debt crisis that is likely to worsen as a result of the Covid-19 pandemic.

In less than two months, another hurricane season will approach regional countries that are already fighting economic collapse, and whose health care systems are overwhelmed as they try to manage coronavirus cases.

In the meantime, hundreds of millions of dollars owed in debt continue to impede governments’ efforts to stablise their economies.

For an island prone to natural disasters, it is little surprise that Antigua and Barbuda’s debt — incurred from disaster response and mitigation measures alone — is about US$160 million.

The challenge now is how the country and other states like it can prevent a debt crisis that will directly affect 65 million people worldwide – 70 percent of whom live in coastal areas just 10 meters above sea level.

Most SIDS do not meet the criteria to access concessional financing, nor are they eligible for debt service suspension, since per capita income (the average income earned per person) in those countries categorised them as middle-income countries.

Within this logic, Antigua and Barbuda graduated to a higher income level and, as a result, is restricted from accessing concessional finance and development assistance.

Concessional loans are what allow poorer countries to access loans at lower interest rates and with grace periods below what the market offers to larger countries.

Without access, SIDS cannot fully implement the Sustainable Development Goals, the SAMOA Pathway and the Paris Agreement by the year 2030 to prevent an end of century warming.

Iolanda Fresnillo, Senior Policy and Advocacy Officer of European NGO network Eurodad, said while these countries collectively represent less than one percent of the global population, they have paid over US$62 billion in interest over the last 10 years. In 2017, that debt was US$52 billion, indicating an increase of US$10 billion in three years.

Fresnillo says debt structural reform should be a priority in 2021 but noted that alone, it cannot solve the growing crisis. She said there should be a unified call for a change in countries’ eligibility to access financing as well as an interest-free moratorium on climate debt in the aftermath of disasters.

Last December, Antigua and Barbuda assumed the chairmanship of the Alliance of Small Island States (AOSIS), an international body concerned with the effect of climate change on small islands and coastal countries.

Ambassador Diann Black-Layne says the focus now is to address the poor implementation record in SIDS in order for countries to get full access to financing.

The twin island state has been working with the Green Climate Fund (GCF) to secure a debt for climate swap of about US$130 – $160 million that can provide significant debt relief.

- Advertisement -


Please enter your comment!
Please enter your name here