Increasing delays in resolving sovereign debt crises in some of the world’s poorest countries are cutting economic growth, reducing life expectancy, and worsening child mortality rates, research supported by the Open Society Foundations (OSF) finds.

Based on data from 131 sovereign debt defaults around the world since 1900, the report, The Human Costs of a Failing Global Debt System (14 pages, PDF), builds on research published last year that showed how going into default leads to economic and human damage that worsens over subsequent years, with impacts often felt most strongly among vulnerable populations, such as children, the elderly, and the poor. According to the report, when a country’s debt crisis is resolved in fewer than three years, infant mortality 10 years after a default is 2.2 percent higher, but when the default continues for more than three years, the difference rises to 11.4 percent; and on average, life expectancy 10 years after default drops by more than one year relative to where it would have been without the default. The report also indicates that the shortfall in the rate of increase in real economic output per capita (against what it could have been without default), widens by 2.5 percent in the first year of default, then continues to grow by 1.5 percent on average annually thereafter, to roughly 14.5 percent over a decade.

The report highlights the case of Zambia, which defaulted on its external debt in November 2020 and now has debt estimated at more than $18 billion. According to the authors of the report, if the debt is prolonged further, it could result in an additional 3,079 infant deaths annually before their first birthdays by the year 2030.

OSF, in partnership with other civil society groups, is pushing for leaders currently gathered at the Paris Summit on a New Global Financing Pact to commit to policies that will significantly reform the international debt restructuring process.

“The findings here starkly illustrate how a dysfunctional global financial system is causing tragic but entirely avoidable human suffering,” said OSF president Mark Malloch-Brown. “The leaders meeting in Paris need to commit to the urgent reforms the world needs to face both deepening poverty and the worsening climate crisis.”

(Photo credit: Getty Images/Sharamand)