Poor and developing countries are currently grappling a major debt crisis, and the coming months will prove to be difficult for them with rising inflation, a slow rate of development, increase in interest rates, and the dollar getting strengthened. The poor countries are under a 16.28 lakh crore rupees debt, taken from rich countries, banks, and private lenders. With the increase of interest rates, the value of USD has increased, and therefore, it is getting difficult for the countries under debt to pay it back in USD.
China is a country which has provided such countries with loans at a large scale, and its strict conditions have made the situation even more critical. The interest will keep on increasing if the debt is not paid back (default), and as a direct result, the economic crisis will expand further. Already, this year, 10 crore people have been trapped in the web of poverty because of the pandemic, inflation, and the attack of Russia on Ukraine.
For the last few weeks, rich countries are organizing internal discussions in order to find out solutions to deal with economic crises in developing countries like Zambia, Sri Lanka, and Ghana. The countries grappling with economic crisis are finding it difficult to come up with a strategy to deal with the same. On the other hand, big lenders like China are not bringing in amendments in the debt conditions.
If the debtor countries do not pay the amounts back, countries like the USA will not be able to export goods to the countries under debt, due to which, the global economy will slow down, and the dangers of hunger and social instability will increase at a large scale. It is being estimated by the World Bank that next year, around 12 countries will come under the category of default. At the same time, the Monetary Fund is of the opinion that this year, 60% poor countries can face the threat of ‘default’. As a matter of fact, a large number of countries have taken debts in an unusual way from the market and China in between 2012 and 2020.