Covid-19 and debt in the global south: Protecting the most vulnerable in times of crisis III

20 April 2020 by Daniel Munevar

(CC - Pixabay : Omni Matryx)

This is the third part of a blog series covering the impact of Covid-19 on vulnerable countries in the global south. Part 1 analyses the impact of debt burdens on health services. Part 2 discusses how the economic crisis will affect countires in the global south. Part 3 highlights the degree of vulnerability of countries in the global south to the Covid-19 epidemic. Part 4 provides a discussion on policy responses to tackle the risks posed by the epidemic.

Eurodad analysis of the interplay between health, trade and financial factors shows the high degree to which countries in the global south are vulnerable to a systemic crisis. Within a sample of 69 LIEs, it is estimated that at least 84 per cent have vulnerable health care systems (58 countries) [1] ; 80 per cent present trade vulnerabilities (55 countries) [2] and a further 46 per cent have debt vulnerabilities (32 countries). [3] In at least 30 per cent of cases (21 countries) these 3 sources of vulnerability are present at the same time. The majority of cases of high vulnerability are concentrated in Sub-Saharan Africa (13 countries) (Figure 1).

Figure 1 – Geographical distribution of simultaneous health, debt and trade vulnerabilities to Covid-19*

Source: WHO Global Health Observatory, IMF country DSA, World Bank WDI, UNCTADStat.

* Scale denotes the number of vulnerabilities present by country

Figures on country-by-country vulnerabilities can be found on the methodological annex

Countries classified as highly vulnerable are in a very fragile position. Even if they manage to avoid a Covid-19 outbreak, the presence of risk factors makes them highly vulnerable to a debt crisis. What’s more, a closer look at the sources of this vulnerability indicates a relationship between the risk of debt distress and the overall degree of vulnerability (Figure 2 – Box 1). 78 per cent of countries classified to be in a situation of debt distress by the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
are also in a situation of high vulnerability. [4] Meanwhile, 38 per cent of countries at high risk of debt distress (9 countries) are in a situation of high vulnerability. This figure drops to 13 per cent (3 countries) and 15 per cent (2 countries) for countries with moderate and low risks of debt distress, respectively.

Figure 2 – Health, debt and trade vulnerabilities in Low Income Economies by risk of debt distress (% of countries by debt risk group)*

Source: WHO Global Health Observatory, IMF country DSA, World Bank WDI, UNCTADStat

* Figures in chart denote number of countries by type of vulnerability

The overlap between the risk of debt distress and health service-vulnerability points once more to the negative impact of debt on health care. For countries in debt distress, debt service Debt service The sum of the interests and the amortization of the capital borrowed. reached 11.5 per cent of GDP GDP
Gross Domestic Product
Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another.
, on average, while public health care expenditure represented only 2.2 per cent of GDP. Delayed and complex debt restructuring processes that last for 2 years or more (Congo, Gambia, Mozambique, Zimbabwe) have inflicted additional economic damage onto these countries. By extension, this has limited their capacity of response to the Covid-19 epidemic. There is a real risk of a rapid surge in the number of countries experiencing these same types of problem. The urgency of this situation highlights the need to reform the current debt resolution system and make progress towards the creation of a multilateral debt workout mechanism, which allows for an orderly, fair, transparent and durable debt crisis resolution to reduce the economic and social costs of debt crises.

Box 1 - Highly vulnerable LIEs to the Covid-19 epidemic by risk of deb distress (Red indicates presence of active reported cases) [5]

  • In debt distress: Congo, Gambia, Mozambique, São Tomé and Príncipe, Somalia, Sudan, Zimbabwe
  • At high risk: Afghanistan, Cabo Verde, Dijbouti, Mauritania, Sierra Leone, Ghana, Tajikistan, Zambia
  • At moderate risk: Kenya, Togo, Yemen
  • At low risk: Senegal, Tanzania

Given the severity of the current risks to public health and economic stability, bold actions will be needed to: a) respond to the direct threat posed by Covid-19, and b) minimize the impact of debt on populations in the global south. We will look further at potential responses in the final part of this blog series.

Read parts one and two


[1Defined as countries with health care systems with either capacity or performance limitations. For a complete definition, data sources and country by country figures, please refer to the methodological annex.

[2Defined as countries with large trade exposure to either China or commodity exports. For a complete definition, data sources and country by country figures, please refer to the methodological annex.

[3Defined as countries with either large short term public external debt stocks or public debt stocks. For a complete definition, data sources and country by country figures, please refer to the methodological annex.

[4Country groups are defined according the latest debt risk assessment performed by the IMF. List of countries per risk group available at:

[5As of March 15, 2020. Data available from:

Daniel Munevar

is a post-Keynesian economist from Bogotá, Colombia. From March to July 2015, he worked as an assistant to former Greek Finance Minister Yanis Varoufakis, advising him on fiscal policy and debt sustainability.
Previously, he was an advisor to the Colombian Ministry of Finance. He has also worked at UNCTAD.
He is one of the leading figures in the study of public debt at the international level. He is a researcher at Eurodad.



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