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World Debt Figures 2015 : Chapter 2
Overview of debt in the South: breakdown of external debt in developing countries (DCs)
by Eric Toussaint , Daniel Munevar , Pierre Gottiniaux , Antonio Sanabria
23 February 2015

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, World Bank 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 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 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 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 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 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 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 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.

Footnotes :

[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.

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.

Pierre Gottiniaux

CADTM Belgium

Antonio Sanabria