The Impact of Debt on Communities

Money for debt repayments is diverted from vital services. For some countries, their debt repayments are such a big portion of the budget that it does not leave enough money to adequately fund basic services. In 2019, 64 countries were spending more on debt payments than on health, 45 countries were spending more on debt payments than on social protection and 24 countries were spending more on debt payments than on public education.

When countries are in, or on the brink of, economic crisis they go to the IMF for a loan. IMF loans come with political and economic conditions. The IMF says that by meeting these conditions the government will make their economy more stable. However, history has shown that when governments have implemented IMF policy conditions, the country has not become more financially stable. Policy conditions of IMF loans have been bad for equality. Conditions have included; cutting the public budget by reducing welfare including pensions, freezing or reducing minimum wage, increasing the price of basic products via VAT, and reducing trade union rights. These ‘Structural Adjustment Programmes’ increase poverty and inequality and undermine democracy because important policy changes come from the lender, not the democratically elected government.