World Debt Figures 2015 : Chapter 2

Overview of debt in the South: breakdown of external debt in developing countries (DCs)

23 February 2015 by Eric Toussaint , Daniel Munevar , Pierre Gottiniaux , Antonio Sanabria

This part provides a general overview of debt trends in Southern countries, [1] highlighting the significant amount of money used to pay off debt, which is in many cases odious, illegal, or illegitimate, and detrimental to the basic rights and needs of people. In Part 3, we will examine this trend for Africa, Asia, and Latin America.

2.1. By type of external debt and debtor

The figure above shows the external debt of DCs by type of debtor. External debt is the debt taken on by a country (the State or private borrowers) from foreign creditors. When it is incurred by different government administrations, it is called external public debt. External private debt is the debt incurred by private borrowers (financial organisations, companies, and households).
External debt makes indebted countries vulnerable to changes in the international financial environment (financial crises in other countries, increasing international interests rates, etc.). In addition, indebted countries sometimes have little control over their own debt, since it may be in foreign currencies or subject to foreign jurisdictions, which are often more favourable to the creditors. Finally, external debt (public or private) can reflect the extent to which an economy is dependent on external funding to cope with the misappropriation of its internal resources.

2.2. Debt in the South by region

In recent years, external debt has increased significantly in absolute values. In fact, it doubled between 2000 and 2012, and most of this increase was concentrated in the private sector.

Table 2.1. External debt by region ($ billion)

In billions of $ External debt 1980 1990 2000 2012
Latin America 230 420 714 1 258
Sub-Saharan Africa 61 176 213 331
Middle East and North Africa 64 137 144 177
South Asia 37 126 163 501
East Asia 61 234 497 1 412
Europe and Central Asia 58 101 234 1 150
Total 511 1 194 1 965 4 829

The situation is similar in terms of external public debt, which nearly doubled in several regions from 1990 to 2012. It is especially Asia and Latin America that reported the highest external public debt as of 1980 (and even before).

2.3. External public debt creditors

The figure above shows the amount of debt by type of creditor. In general, bilateral debt and especially debt contracted from international financial institutions, such as 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.
, World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

and regional development banks, reflect the funding difficulties encountered on the private markets. These official loans generally include conditionalities imposing severe adjustments that have disastrous consequences on the lower classes in the countries concerned.

As the figures above indicate, private creditors are owed half of the DCs’ external debt, and this funding is especially based on the securities they issue. In effect, given the tremendous liquidity Liquidity The facility with which a financial instrument can be bought or sold without a significant change in price. in capital markets, which offer financing at a very low rate—an economic context that has been more favourable to some economies in the South, which have accumulated large quantities of currency reserves (see point 2.8)—the IFIs are no longer the primary lenders they were in the past.

In the last three decades, only one significant change has occurred in the breakdown of external public debt. Whereas the share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of loans from international financial institutions has decreased, this drop has been offset by an increase in bilateral loans. Meanwhile, the share from private actors decreased in the 1980s and 90s, before increasing significantly in the 2000s.

Table 2.2. Trends in the breakdown of external public debt creditors (%)

% of foreign public debt 1980 1990 2000 2012
Multilateral share 31 34 30 20
Bilateral share 15 21 27 31
Private share 54 45 43 50
Total 100 100 100 100

Table 2.3. External public debt by region ($ billion)

Foreign public debt 1980 1990 2000 2012
Latin America 126 314 385 577
Sub-Saharan Africa 42 144 162 200
Middle East and North Africa 54 114 112 121
South Asia 32 108 135 215
East Asia 36 173 271 354
Eastern and Central Europe, Turkey and Central Asia 34 80 118 297
Total 323 932 1 184 1 766

2.4. Debt in the South and the resources to repay it

Since 1980, there has been a 900% increase in the external debt of Southern countries. Nearly 30% of this debt was contracted by the public sector. Due to this situation, the governments allocate more money for external debt repayments than the official totals reported in their books as official development assistance ODA
Official Development Assistance
Official Development Assistance is the name given to loans granted in financially favourable conditions by the public bodies of the industrialized countries. A loan has only to be agreed at a lower rate of interest than going market rates (a concessionary loan) to be considered as aid, even if it is then repaid to the last cent by the borrowing country. Tied bilateral loans (which oblige the borrowing country to buy products or services from the lending country) and debt cancellation are also counted as part of ODA. Apart from food aid, there are three main ways of using these funds: rural development, infrastructures and non-project aid (financing budget deficits or the balance of payments). The latter increases continually. This aid is made “conditional” upon reduction of the public deficit, privatization, environmental “good behaviour”, care of the very poor, democratization, etc. These conditions are laid down by the main governments of the North, the World Bank and the IMF. The aid goes through three channels: multilateral aid, bilateral aid and the NGOs.
from the Northern countries and the official organisations that work for them. We say ‘official totals reported’, because in reality a large proportion of this official development assistance is trapped in the North by various mechanisms, and never makes it to the South.

Official Development Assistance (ODA) [2]

A large proportion of official development assistance goes back to the donor countries or simply remains in these countries, so a distinction must be made between ‘real aid’ and ‘phantom aid’. For example, partial cancellations of debt are included in the official figures, [3] as are the administrative costs and technical cooperation fees (which represent more than one fourth of total ODA), whereas this money is not transferred to the developing countries. Tied bilateral aid (which means that the beneficiary country has to buy products or services from the donor country) and costs for ‘welcoming’ refugees from the South in Northern countries, in some countries the cost of the imprisonment of refugees in detention facilities are also considered to be ODA. Ultimately, the percentage of ODA that actually makes it to the beneficiary countries and can be invested in development projects is very small.

Table 2.4. External debt of developing countries and the resources needed to service this debt ($ billion)

StockServiceof which : Public sharePrivate share
1980 510 79 48 31
1990 1194 129 100 29
1995 1744 201 138 63
2000 1966 325 164 161
2005 2338 400 180 220
2012 4830 660 182 478

2.5. Odious debt

Regardless of how much debt has accumulated, it is vital to remember the origins of public debt. In many cases, the process through which debt has accumulated was initiated by non-democratic governments. Consequently, this debt must be considered as odious, which means that the countries concerned are not obliged to pay back their creditors.

Generally speaking, odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts.
is defined in terms of the following criteria:

  • no consent by the people in the country concerned by the debt,
  • no benefits for the people,
  • The creditors knew (or were in a position to know) the odious use of the loans

Table 2.5. The origins of odious debt ($ billion)

Odious debt: debt incurred during a dictatorship [5]

Country Name Foreign public debt in 2012 ($bn) Regime Dictatorship period Odious debt ($bn)
Indonesia 121 Suharto 1965-1998 77
Brazil 117 Military Junta 1965-1985 77
Argentina 68 Military Junta 1976-1983 27
Turkey 99 Military regime 1980-1989 23
Pakistan 45 Military regime 1978-1988 7
Pervez Musharraf 1999-2008 16
Philippines 43 Marcos 1965-1986 21
Morocco 25 Hassan II 1961-1999 19
Egypt 32 Moubarak 1981-2011 16
Thailand 35 Military regime 1966-1988 14
Zaïre/CDR 4 Mobutu 1965-1997 10
Chile 16 Pinochet 1973-1990 9
Tunisia 17 Ben Ali 1987- 2011 9
Ethiopia 10 Mengistu 1977-1991 9
Peru 20 Fujimori 1990-2000 7
Soudan 16 Nimeiry 1969-1985 7
Kenya 9 Arap Moi 1978-2003 5
Congo 2 Sassou 1979- 4
Bolivia 4 Military Junta 1964-1982 3
Uruguay 12 Military Junta 1973-1985 2,7
Mali 3 Traoré 1968-1991 2,5
Nigeria 7 Buhari/Abacha 1984-1998 2,3
Guatemala 6 Military regime 1954-1985 2,3
Paraguay 2 Stroessner 1954-1989 2,1
Somalia 2 Siad Barre 1969-1991 2,1
Malawi 1 Banda 1966-1994 2
Gabon 3 Omar Bongo 1967-2009 2
Burma (Myanmar) 2 Military regime 1988- 1,7
Guinea 1 Lansana Conté 1984-2008 1,7
Togo 0 Eyadema/Gnassingbé 1967- 1,6
Cambodia 5 Khmer Rouge 1976-1989 1,6
Chad 2 Déby 1990- 1,3
Liberia 0 Doe 1980-1990 0,9
Rwanda 1 Habyarimana 1973-1994 0,9
Nicaragua 3 Anastasio Somoza 1974-1979 0,8
Haiti 1 Duvalier 1957-1986 0,7
Salvador 7 Military Junta 1962-1980 0,5
Nepal 4 Gyanendra 2001-2006 0,5
Uganda 3 Idi Amin Dada 1971-1979 0,4
Cameroon 3 Paul Biya 1982- 0,2
Niger 2 Baré 1996-1999 0,2
Central African Republic 0 Bokassa 1966-1979 0,1

2.6. Net debt flows

Net debt flow is defined as the total amount of loans and credits received minus the total amount of capital and interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. repayments made. A negative figure means that the debtors transferred more resources to their creditors than they received in new loans and credits.

For thirty years, external debt has been a mechanism pumping economic resources out of developing countries, in the form of a negative net debt flow. In other words, DCs have been paying their creditors more than they have received, so the net capital flow has been from the DCs to developed countries, and not in the opposite direction as one would imagine.

This trend has only been reversed in recent years due to the rapid increase in external debt through additional borrowings that more than balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. outgoings. Nonetheless, there is still a negative net external debt flow in the public sector of Southern countries. The resources (i.e., the total amount of loans and credits granted, minus the total amount of repayments made) transferred by the governments of DCs to developed countries between 1985 and 2012 are the equivalent of 2.5 times the resources provided by the Marshall Plan Marshall Plan A programme of economic reconstruction proposed in 1947 by the US State Secretary, George C. Marshall. With a budget of 12.5 billion dollars (more than 80 billion dollars in current terms) composed of donations and long-term loans, the Marshall Plan enabled 16 countries (notably France, the UK, Italy and the Scandinavian countries) to finance their reconstruction after the Second World War. for the reconstruction of Europe after the Second World War.

Table 2.6. Net debt flows for all DCs ($ billion)

Total net flows 1985 - 2000 1985 - 2005 1985 - 2012
Foreign debt -195 -264 1 166
Foreign public debt -188 -398 -251

2.7. Comparison of financial flows

In this section, we compare the different financial flows going from the North to the South, and from the South to the North. Official Development Assistance (ODA) and the remittances sent by emigrants are much lower than the flows from DCs to their various creditors and to the foreign corporations that do business in the DCs.

In other words, the developing countries are net creditors of the developed countries, as shown in the table below. It is worth noting that in 2012, DC governments repaid to their creditors ($182 billion) much more than the ODA they received ($133 billion). [6] In fact, the money entering DCs is to a large extent in the form of remittances from emigrants ($350 billion), which is 2.6 times the ODA. Finally, we must highlight the tremendous profits made by multinational corporations that flow rapidly out of DCs ($678 billion in 2012), and cannot therefore be used to finance their development or social services.

Table 2.7.

2.8. Accumulation of international reserves

The logic of the current system obliges developing countries to incur debt in unfavourable conditions, and at the same time to accumulate reserves in the currencies of the most economically developed countries. What explains this system?

  • First, the currencies of weaker economies are more unstable with exchange rates that vary a great deal compared to strong currencies. As a result, to obtain external funding at a lower cost, DCs generally borrow money in foreign currencies, especially ones that are strong and stable (mainly the US dollar).
  • Second, external goods and services (imports) are purchased in strong currencies (for example, the euro to import machinery from Germany, the yen to buy computers from Japan, and the dollar for oil imports).
  • Third, they need currency to pay back the external debt. We see that it is a vicious circle: they borrow currency and incur new debt to pay back their old debt.
    For these three reasons, they must accumulate foreign exchange reserves in strong currencies.

In recent years, many DC economies recorded a positive debt flow. In other words, more money flowed into their economies than out of them. Two of the principal causes were a favourable context for the raw materials export market, with increasing international demand and prices, and improved South-South economic relations. This situation has enabled DCs to accumulate growing volumes of foreign exchange reserves. To maintain their reserves, they have decided to invest in assets considered to be safe, the least risky of which are public debt instruments of developed countries, such as US Treasury bonds. Consequently, we are in a situation in which the economies of developing countries are financing the economies of developed countries. On the one hand, by repaying their external debts; and on the other, through their own reserves that are invested in the debt instruments of Northern countries.

Table 2.8. Trends in international reserves of DCs and China ($ billion)

This table shows the growing accumulation of foreign exchange reserves, particularly in the case of China. In 2012, almost half (49%) of the total foreign-exchange reserves of developing countries were held by China.

The most highly developed countries have foreign exchange reserves amounting to only about $2.3 trillion. $50 billion of those reserves are held by the US, which does not need foreign exchange reserves since the rest of the world accepts the dollar as the international currency— one of its privileges. The eurozone only has foreign exchange reserves of $220 billion. We should stress that Japan (about $1.2 trillion in foreign exchange reserves) and Switzerland (about $490 billion) hold more than 70% of the total foreign exchange reserves of the most highly developed countries. [9]

Table 2.9. Foreign exchange reserves of DCs and external public debt in 2012 ($ billion)

Country Foreign exchange reserves Public foreign debt
China 3388 74
India 300 119
Brazil 373 117
Peru 64 20
Algeria 201 2
DC s 6880 1766

Table 2.10. Developing countries and emerging economies that are creditors of the United States [10]
(value of US Treasury bonds in $ billion)

Country US bonds
China 1270,3
Oil exporting countries 265,1
Brazil 257,9
Taïwan 188,9
Russia 153
India 70,2
Mexico 68,9
Turkey 50,9
Thaïland 48,1
Philippines 38,6
Colombia 32,9
Kazakhstan 30,8
Chile 28,5
South africa 14,6
Vietnam 13,4
Peru 13,3

This table shows the value of US treasury securities held by developing countries. China holds more than one quarter of such public debt instruments (27.4%), and is therefore the principal foreign creditor of the US.


[1In this part, we analyse the trends in the debt of low and medium-income countries according to World Bank data: International Debt Statistics,

[2Millet, Damien & Toussaint, Éric. Debt, the IMF, and the World Bank. Sixty Questions, Sixty Answers, New York: Monthly Review Press, 2010, p. 229-236; Millet, Damien & Toussaint, Éric, Les faux-semblants de l’aide au développement, Le Monde diplomatique, July 2005, (in French and Spanish).

[3When France cancelled €50 million of the Ivory Coast’s debt, €50 million were added to France’s ODA figures, but no payments were made. It is simply a line on a balance sheet.

[4The repayments or debt service correspond to the amount of capital and interest paid for the debt.

[5The odious debt calculated here corresponds to the debt incurred during a dictatorship. These amounts do not include the debt incurred subsequently to repay the debt taken on during the dictatorship. The World Bank provides no data for Iran, Iraq, or apartheid South Africa.

[6We must remember that the ODA figures are largely exaggerated because a large proportion of it never makes it to the developing countries as real money. See box in point 2.4.

[7The figure for official development assistance includes financial flows that are counted as official aid. The figure for the repatriation of profits from multinationals is entered into the ‘payments’ side of the current account balance of payments.
We are reproducing World Bank data for these four flows. However, according to the CADTM, the balance is incomplete, because these data do not account for the actual drain of resources flowing from developing countries to developed countries. We must also add the flight of capital, the cost of brain drain, an estimate of the looting of natural resources, and the losses stemming from payments for intellectual property rights (patents and copyright).
Toussaint, Éric, Your Money or Your Life – The Tyranny of Global Finance, Chapter 9. Chicago: Haymarket books.

[8Foreign exchange reserves include foreign currencies and gold. At the end of the 1st quarter of 2014, the figures for China are estimated to be greater than $3.95 trillion (Radio China International: (French))

[9Source: Bank for International Settlements (BIS), 84 th Annual Report 2014, Basel, June 2014, p.102, Annex Table V.1.

[10Source: US Department of Treasury, Major Foreign holders of treasury securities, data from March 2013,

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

Other articles in English by Eric Toussaint (639)

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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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Other articles in English by Antonio Sanabria (9)


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