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Sri Lanka’s Debt Crisis Recovery

Sri Lanka’s CrisisSovereign debt, the money a country borrows from international lenders, is an important source of financing for governments to invest in growth and development. Many countries rely on foreign borrowing, but if the debt becomes unsustainable, it can lead to economic crises and increased poverty. In 2023, the United Nations (U.N.) warned that some governments are now spending more on servicing debt than on essential sectors such as health and education.

Global public debt has risen rapidly, with almost 40% of the developing world in serious debt. As a result, many developing countries face a difficult choice between paying their debts and investing in public services such as health care, education and infrastructure. The situation requires greater transparency, stronger tools to ensure debt sustainability and faster debt restructuring agreements between governments, private creditors and international financial institutions.

Sri Lanka’s Debt Crisis

Sri Lanka, a lower-middle-income developing country, experienced a severe economic crisis in 2022 when the government failed to repay its foreign debt for the first time in its history. Before this, Sri Lanka had maintained a perfect record of external debt repayment since gaining independence in 1948. The default triggered the worst economic crisis the country had ever faced. 

Prices increased dramatically and there were shortages of essential goods, including fuel, food and medicine. Fuel shortages meant buses, trains and medical vehicles struggled to operate, while gas and diesel prices rose sharply. Schools had to close and many people had to work from home to conserve fuel. The country also experienced long power cuts and widespread inflation, including food inflation that reached 95%. 

Additionally, taxes on goods were doubled, electricity prices increased and fuel subsidies were removed. As a result, poverty in Sri Lanka doubled, reaching 26% of the population, with millions of people pushed into hardship.

What Caused the Crisis?

One of the key causes of Sri Lanka’s crisis was a shortage of foreign currency. The country imported about $3 billion more goods each year than it exported, which gradually drained its foreign exchange reserves. By the end of 2019, Sri Lanka had about $7.6 billion in foreign reserves, but this rapidly fell to around $250 million, leaving the country unable to repay its sovereign debt. 

Government policy decisions also worsened the situation. In 2019, large tax cuts introduced by the government reduced public revenue by more than $1.4 billion per year. This weakened the country’s finances and made it more difficult to service its debt. 

How the Government Responded

To address Sri Lanka’s crisis, the government proposed using funds from workers’ retirement savings to help repay the country’s debt. The government also sought international support. The International Monetary Fund (IMF) determined that Sri Lanka’s debt was unsustainable and agreed to provide a $3 billion loan while helping design an economic recovery program. 

The government also sought financial assistance from other partners to mitigate the crisis’s impact on citizens, with its major creditors, including China and India, agreeing to extend the repayment timeline. As part of the recovery plan, Sri Lanka also introduced tax increases on products such as fuel and food. Furthermore, it announced plans to raise funds by restructuring state-owned enterprises and privatizing the national airline. 

In 2024, Sri Lanka’s national debt was formally restructured after negotiations with creditors. However, challenges remain. In 2025, a cyclone caused further devastation, prompting people to call for a suspension of the country’s debt repayments. 

What Happens Next?

By 2024, Sri Lanka’s economy had stabilized faster than expected, surpassing the performances of other debt-defaulting countries. Inflation fell to single digits, but stabilization alone is not enough. The country has often failed to introduce deeper structural reforms after past crises. For long-term recovery, it will need strong political commitment to implement policies that encourage sustainable growth.

Many experts argue that Sri Lanka will need debt relief or cancellation to recover fully. People need decent jobs, wages, rights, social protection, inclusion and equality. The outcome will also serve as an important test for international organizations such as the IMF in how they manage sovereign debt crises and it will demonstrate the urgent need to reform how debt crises are managed. 

– Jeanne Pellet

Jeanne is based in London, UK and focuses on Business and Technology for The Borgen Project.

Photo: Unsplash

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Kenya’s National Debt Crisis: The Toll On Its Population

Kenya's National Debt Crisis: The Toll On Its Population Kenya’s national debt has risen significantly in recent months, increasing by almost KES100 billion. This comes as the nation’s economy grows at a rapid rate, in part because of loans taken out to improve infrastructure. Kenya’s situation reflects the tough decisions many developing countries face between short-term improvements and long-term sustainability. Meanwhile, some proposed solutions could support progress in both areas.

Origin of Kenya’s Debt

Kenya’s debt originates from two primary places: loans from other countries and loans from private organizations. One of its largest lenders is China, which provided significant financing for Kenya’s national railroad. As for private loans, Kenya has taken out substantial funding through Eurobonds, a type of international debt security. The numerous loans have compounded, trapping Kenya in a cycle of debt that is increasingly difficult to escape as interest accumulates.

Chatham House also noted that Kenya’s internal fund management issues have contributed to repayment challenges. The volume of loans taken out made long-term repayment more difficult despite short-term infrastructure gains. Regardless of the debt’s origins, Kenya’s high debt burden has led to further issues, particularly for its most vulnerable populations.

The Effect on Poverty

Given the large debt, the Kenyan government has prioritized interest repayments. This has caused public goods such as health care to receive less funding. Reduced investment in public works can lead to declines in quality of life. Additionally, many low-income households could face tax increases as the government seeks extra revenue. Afronomics Law reported that as Kenya’s national debt reached its ceiling in 2023, the increased burden could expand public debt, which is debt owed by citizens. Because of this, Kenya has been working to find ways to address debt while minimizing negative effects on its population.

Ongoing Efforts

Many organizations, both within and outside Kenya, have made recommendations for how the country should move forward. According to the World Bank, Kenya’s latest financial review suggested government restructuring to help address the debt challenge, primarily through stronger tax policy and improved efficiency in public spending. These steps would help strengthen the country’s gross domestic product (GDP) while reducing dependence on additional loans. The World Bank also noted that these measures could support job creation, helping to alleviate poverty. They stated that austerity measures are not recommended because they often come with severe costs to citizens.

Kenya’s government is also implementing its own strategies. Parliament recently passed an extensive debt mitigation plan to prevent further problems. The bill is not intended as a long-term solution but rather as a way to reduce damage caused by the existing debt. These strategies include increasing borrowing from domestic sources, which the national treasury determined would minimize external debt owed.

Looking Ahead

This decision between paying off loans and funding government programs does not have an easy answer. However, the examples above show that Kenya can take practical, actionable steps without worsening conditions for its citizens. Many other nations face similar debt challenges, and understanding how Kenya reached this point, and how it can move forward, could offer valuable insights for developing nations worldwide.

– Thaddeus Konieczny

Thaddeus is based in Williamston, MI, USA and focuses on Good News and Politics for The Borgen Project.

Photo: Flickr

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How Debt Restructuring in Ghana Creates Room for Development

Debt Restructuring in GhanaGhana has dealt with a debt crisis since the early 2000s, originating from a long history of colonialism. Although it was one of the first African countries to gain independence in 1957, Ghana continues to depend on the export of raw materials such as gold, oil and cocoa. When global commodity prices declined in the ’80s and ’90s, countries in the Global South relied on the International Monetary Fund (IMF) and the World Bank’s advice to expand production to pay debts. As a result, the price of commodities remained low for 20 years.

The HIPC Initiative and Debt Relief Successes

In 2002, the Ghanaian government granted the central bank autonomy to use monetary policy as a tool to promote economic growth and deal with inflation. Falling from 30% to 10% by 2007, fiscal policy enacted under the joint IMF-World Bank debt relief program, the Heavily Indebted Poor Countries Initiative (HIPC), was key in taming the country’s economic problems.

After part of the country’s debt was cancelled during the program’s implementation, Ghana’s external debt fell by $4.3 billion between 2006 and 2003, from $6.6 billion to $2.3 billion. Debt relief proved to be a successful means of fighting poverty and increasing the potential for development. Improvements in health care and education followed, with money being invested in social services for Ghanaian citizens.

One of the most important features of the government’s budgetary operations under the HIPC Initiative was its positive impact on poverty reduction. The Ghana poverty reduction strategy document emphasized integrated rural development, economic growth, expanded employment opportunities and improved access to public services. To achieve these goals, the government would have to implement sound monetary and fiscal policies made possible through debt relief.

New Debt Restructuring Framework in Ghana

However, the country’s continued reliance on the export of commodities has led it into another debt crisis. When the price of raw materials rose in the 2010s, more countries became willing to lend to Ghana. However, after another fall in the cost of commodities in 2013, the African country became unable to repay loans and started accumulating debt. Debt now places a new, significant burden on Ghana’s economy and society, which could lead to stagnation and higher poverty rates.

Recently, Ghana’s parliament approved a $2.8 billion debt restructuring framework for 25 creditor countries. Although the deal is not yet final, debt relief would again allow the country to invest in social services instead of using its revenues to pay off lender countries. In the 2000s, debt restructuring was critical in restoring macroeconomic stability; by rescheduling debt payments due between 2022 and 2026 to 2039 – 2043, there is hope that the country can break its cycle of debt.

The newly created Agenda for Jobs II (2022–2025) aims to develop further Ghanaian life’s economic, social and environmental dimensions. It focuses on expanding education and health care initiatives. The agenda also seeks to broaden the coverage of the Livelihood Empowerment Against Poverty (LEAP) Program.

Conclusion

In collaboration with international partners, new debt restructuring efforts in Ghana have opened a new chapter in the country’s economic development. The potential ratification of these new agreements will free up significant public funds that can be invested in public sectors such as health care, education and infrastructure, contributing to the country’s fight against poverty. Debt restructuring allows for future economic growth, catalyzing social progress.

– Rafaela Paquet

Rafaela is based in Montreal, Canada and focuses on Politics for The Borgen Project.

Photo: Wikimedia Commons

COVID-19, Poverty and The Debt Service Suspension Initiative (DSSI)

COVID-19, Poverty and The Debt Service Suspension Initiative (DSSI)
In the wake of its continuing devastation, Covid-19 has left, among other things, recessions across the world’s poorest countries. These recessions threaten to push more than 100 million people below the $1.90-a-day threshold that defines extreme poverty. To prevent poverty exacerbation, G20 countries have been called on by the World Bank and the International Monetary Fund to establish the Debt Service Suspension Initiative (DSSI). The initiative is designed to redirect funds planned for debt liquidation towards battling the pandemic and helping the most vulnerable populations.

How Does It Work?

Established in April 2020, the DSSI allows the suspension of government-to-government debt payments for 73 eligible countries. Over 60% of these countries accepted the offer as of 2021. The International Development Association and the U.N.’s respective lists of least developed countries encompass all countries cleared for suspension, minus Angola. Qualification for deferment also requires an application for an arrangement with the IMF, along with a commitment to use unfettered money towards social, health, or economic spending designed to remedy the effects of Covid-19.

Including interest and amortization payments, the total sovereign debt servicing payments in 2020 was projected to reach nearly $14 billion. Less than $4 billion of that belongs to the Paris Club group, prompting calls for other creditors like China and Russia to take part. Additionally, the G20 received requests to include entities such as banks and investment funds in the initiative, but this call has yet to receive a favorable response. About $5.7 billion in payments were deferred in 2020, with an additional deferment of $7.3 billion planned for June 2021.

The Unturned Stones

Reservations have been voiced regarding the ability of the temporary cessation of bilateral debt payments to provide adequate relief for the countries concerned. All debt is not the sovereign debt that is accounted for in the DSSI, and the fiscal ability of the approved countries is largely insufficient to weather the inclemency of Covid-19, even with debt deferment. At the vanguard of the call to private-sector creditors to adopt the initiative is the Institute of International Finance (IIF), a global association concerned with the finance industry.

Estimations from the IIF show that participation by private-sector creditors would provide an extra $13 billion in deferment. This would offer significant potential relief from the $35.3 billion owed collectively by the countries eligible for the DSSI. However, the IIF has made its concerns clear, particularly concerning the DSSI’s lack of consideration for the unique situation of each debtor country and the doubt that this causes for private-sector creditors.

The overall narrow eligibility scope of the DSSI has also been called into question. Middle-income countries have over eight times the amount of collective external debt outstanding compared to DSSI eligible countries. With $422.9 billion in debt payments in 2020 alone, these countries also run the risk of being financially incapable of dealing with Covid-19. After foreign investors pulled approximately $100 billion from middle-income countries’ markets in stocks and bonds, capital outflows leveled. The IIF, perhaps because of this observation, projected that the countries in question will encounter difficulties in borrowing money. The IIF also made projections that indicated unparalleled fiscal deficits in 2020.

Possible Solutions

Currently, no mechanism is in place to ensure that deferred debt payments will be used accordingly. One proposal involves the creation of a central credit facility (CCF) at the World Bank. This organization, if allowed, would require countries requesting relief to deposit deferred interest payments to certify that the funds would be used to negate the effects of the pandemic. Although the CCF has gained academic support and press recognition, whether countries will adopt it is uncertain.

Corporate or individual bankruptcy for countries is not an option.  The IMF attempted but failed to establish a sovereign resolution regime with its Sovereign Debt Restructuring Mechanism (SDRM) proposal in 2002, ultimately because of conflicting opinions on how to structure its design. A notable implementation of a debt moratorium occurred in 1931 by Herbert Hoover, then President of the United States. His declaration was followed by a rush of countries defaulting. Although these countries recovered faster than countries that did not default, such countries were hard-pressed to find any foreign lending for more than 20 years after defaulting.

Forging A Way Forward

While COVID-19 inflicted disastrous financial difficulties on nations worldwide, initiatives like the DSSI work to counteract the damage. In April 2021, G20 government-to-government creditors extended the DSSI for the final time by six months, taking its activity through December 2021. Despite concerns about its implementation and consequences, the DSSI represents a positive attempt by creditors nationwide to help the most vulnerable in the wake of COVID-19.

– Mohamed Makalou
Photo: Unsplash

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10 Facts About Poverty in Italy That Everyone Should Know

Facts About Poverty in Italy

In 2017 the number of individuals in Italy living in “absolute poverty” rose to 5.1 million people, or 8.4 percent of Italy’s population. That number is up from the 7.9 percent reported back in 2016. Absolute poverty refers to a condition where a person does not have the minimum amount of income needed to meet the minimum requirements for one or more basic living needs over an extended period of time. With such a great amount of people unable to support themselves on a day to day basis and the overall region experiencing a rise in poverty levels each year, it is time to take another look at the facts about poverty in Italy.

10 Facts About Poverty in Italy

  1. Poverty is a threat in southern Italy. Southern Italy’s economy has grown slowly compared to northern Italy and its economy contracted by 13 percent from 2008 to 2013, almost twice as fast as the North’s at seven percent. Between 2007 and 2014, 70 percent of people in Italy who were in poverty were from southern Italy. The threat of poverty has caused some individuals to join the mafia in order to escaped the harshness of absolute poverty. Today, 47 percent of people still live at risk of poverty in southern Italy.
  2. The average household income in Italy rose in 2015, around €2,500 per month, but this was heavily concentrated in the richest fifth of Italy’s population. Think tank Censis reported that more than 87 percent of working-class Italians say it is difficult to climb the social scale, along with 83 percent of the middle class and 71 percent of the affluent.
  3. Italy’s debt is one of the worst in the E.U., with a national debt of $2.6 trillion, roughly 120 percent of its GDP. The debt was not as bad in the 1990s due to smart budgeting tactics, but after the global recession hit, the debt crisis began. Italy may not be able to sell its new debt to cover its old debt, indicating why these facts about poverty in Italy are so important to understand.
  4. Corruption within Italy has halted economic growth. More than 15 percent of Italy’s economy occurs on the black market and other underground avenues. With a past filled with tax evasion charges among others, Italy has seen its good government standing decrease over the years. Bad government leads to bad decision making which ultimately leads to the downfall of a good economic plan.
  5. Minors also face the brunt of poverty. In 2017, 1.208 million minors were living in absolute poverty. Children growing up in poverty leads to many problems down the road. Many may drop out of school to support their families or find other methods to garner a decent living. Italy’s poverty problem is so deep that not even children can escape it.
  6. With the establishment of new leadership in government, Italy is looking at a hopeful start to fixing its economy. Italy’s GDP rose 1.5 percent last year, the highest since 2010. While growth has been slow, the government is now actively trying to combat poverty.
  7. Recently the Italian government passed a bill that allocates €1.6 billion to help families in need as well as minors in need. The bill focuses on tackling poverty through welfare packages and anything else that can help people get by.
  8. The proposed bill gives families in need up to €400 each month. The estimate is that around 400,000 families will benefit from this new bill. The country’s Labour Minister Giuliano Poletti stated that the bill “fills a long-standing gap in the Italian system of protecting individuals on a low income, and is the sign of a new approach to social policy.”
  9. The grand plan to end poverty in Italy centers around the idea of social development, or establishing the means in which the foundation of Italy is secure and no one is at risk of being in poverty. Social development has been what the U.N. has cited as the most efficient way of reducing poverty.
  10. Italy looks to improve its economy each year at around one percent and continues to be optimistic about its chances of reducing poverty. Job growth is the priority of the current government and many steps are being made to accomplish that goal.

While Italy has one of the worst economies in the E.U., the nation is working to improve its conditions. These 10 facts about poverty in Italy demonstrate both the breadth and depth of the problem as well as the steps the country is taking to resolve its issues.

– Michael Huang
Photo: Flickr

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The Youth Unemployment Rate in Greece

Youth Unemployment Rate in GreeceThe youth unemployment rate in Greece has reached tremendously high levels and is resulting in the growth of poverty among young Greeks, in addition to stunting the development of the Greek economy. As of May 2017, the youth unemployment rate in Greece reached a staggering 46 percent. This rate means that roughly half of the Greek youth population are unable to find employment opportunities.

Looking at the high rate of youth unemployment, one factor can be seen as its primary cause: Greek debt.

In 2011, due to its ballooning debt levels and fears that Greece would default on its debt, European counterparts were forced to give Greece a bailout package of €109 billion. As part of the loan, however, major credit rating agencies gave Greece a rating along with a disclaimer saying there would be a substantial risk of default on Greek debt.

By giving Greece this rating, the country pushed away potential investors in the Greek economy, and, in combination with the effects of Greek austerity programs, substantially hurt the growth potential of the Greek economy. The adverse effects observed in Greece are exemplified by the fact that the country’s economy has contracted by a quarter since the crisis began.

The minimum wage in Greece is calculated differently for younger people than it is for people over 30, so young Greeks who have a job are often paid at a significantly lower rate than older workers.

As an overall effect on poverty in Greece, the high youth unemployment rate will very obviously impact the country and raise its poverty rate. As the Greek economy continues to deteriorate and young people continue to go without opportunities to work, the poverty rate in the country will inevitably grow.

Going hand-in-hand with the increase in the rate of poverty among young people in Greece is the level of youth homelessness. As the unemployment rate continues to climb, the rate of homelessness among Greek youth – in addition to the rate of substance abuse – both continue to rise.

Overall, the youth unemployment rate in Greece is elevating enough to become a significant issue requiring foreign assistance to resolve. As countries capable of proving support, the United States and Greece’s European counterparts must increase aid to help Greece combat this problem. By focusing efforts on increasing the success of the Greek economy, issues such as youth unemployment will certainly begin seeing improvement.

– Garrett Keyes

Talks Collapse as Argentina Defaults

Recent talks between Argentine economic officials and U.S. creditors have fallen through, forcing the South American country to default on billions of dollars in bonds. June 30 was the end of a 30 day grace period for Argentina to pay $539 million in interest to investors that hold $29 billion of the country’s restructured bonds. This is the second time in 13 years that the country has defaulted.

Negotiators from both the U.S. creditors and Argentinian representatives had until 04:00 GMT on June 30 to come to an agreement. The U.S. creditors have been holding out since Argentina restructured their debt in 2005 and 2010. At least 90 percent of the investors agreed to accept new bonds that had reduced payments.

The last remaining investors were holding out because they refused the terms of the most recent restructuring, and were eventually backed from a ruling by a U.S. District Court judge in New York. Argentina has tried offering these holdouts similar terms to those extended to the investors who had initially accepted the restructuring, but the holdouts continued to refuse the offers throughout the process.

The Argentine minister firmly held the position that the country would be unable to pay the holdout hedge funds an amount different from their most recent restructuring deal. They firmly held this stance throughout the negotiations, in spite of the ruling by a U.S. judge that requires them to pay the hedge funds.

Alex Kicillof, Argentina’s economic minister and representative at the talks, has repeatedly called the holdout investors “vultures,” and has placed the blame on the U.S. It’s still up for debate which side is at fault for Argentina’s predicament, but one lasting result from this situation is that it will create a new set of questions about what kind of and how much power U.S. courts have in cases that involve other nations.

This new default would place a new set of pressures on Argentina, which is still struggling to recover from its most recent recession. As of right now, it is anticipated that the currency will weaken, but it will take more time before other effects will be felt by the public. However, the general consensus is that this new default won’t have as drastic an effect on the country as their previous default in 2001.

Daniel Pollack, the mediator of these talks, however, indicated that there will be some demonstrable effect of Argentina’s default. As he explained, “Default is not a mere ‘technical’ condition, but rather a real and painful event that will hurt real people. The full consequences of default are not predictable, but they certainly are not positive.”

Despite the pessimistic future facing Argentina, there is a sign of hope. Even through the 30 day grace period has ended, both sides are still continuing their talks in an effort to mitigate the effects of the default before they worsen. As of this writing, though, no agreement has been reached, despite the efforts by both Argentine officials and U.S. creditors.

– Andre Gobbo

Sources: Wall Street Journal, BBC, Reuters
Photo: Reuters

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Three Influences of Poverty

Poverty has many causes. While some factors exacerbate poverty, there are five predominant causes of poverty: social inequality, conflict and political instabilities, education, debt and environmental conditions. Here is a closer examination of three of these causes.

Social Inequality

The United Nations Social Policy and Development Division reports that “inequalities in income distribution and access to productive resources, basic social services, opportunities, markets, and information have been on the rise worldwide, often causing and exacerbating poverty.” Countries where inequality is rampant display poor social indicators for human development, insecurity and anxiety. Inequality keeps the poor from moving out of their socioeconomic status.

Inequality limits access to opportunities that can provide the means to escape poverty. In a speech by Dominique Strauss-Kahn, Managing Director of the International Monetary Fund, Kahn explains that Adam Smith, often considered the founder of modern economics, “recognized clearly that a poor distribution of wealth could undermine the free market system.” An example of this is the former apartheid government in South Africa.

Apartheid laws assign rights and space to individuals on the basis of race. In South Africa this meant that while one group was persecuted and forced into poverty, the other group was given access to opportunities that allowed them to advance economically. This increased the gap between economic classes and the amount of people in poverty.

Environmental Conditions

Environmental degradation is the decline in the quality of the natural environment through its atmosphere, land, oceans and lakes. Indigenous groups are among the worsetaffected by such degradation. These groups often depend on the environment to survive and easily fall into poverty when that environment is harmed. A major cause of environmental degradation is climate change.

One of the outcomes of climate change is hunger. The changing climate is responsible for the destruction of harvests and other resources critical to survival. Michael Oppenheimer, professor of geosciences and international affairs at Princeton University explains, “crop yields have detectably changed. As time goes on the poor countries that are in the warmer and drier parts of the planet will feel the crop yield decreases early.” In Oxfam’s report Suffering The Science: Climate Change, People, and Poverty, the organization warns that “Without immediate action 50 years of development gains in poor countries will be permanently lost.”

Recent U.N. reports on climate change noted that “for the first time” that climate change is a threat to human security. The UN notes that the increased migration and the decrease in food are conditions that lead to conflict. The reports warn also that unless the issue is addressed, “nobody would be immune to climate change.” The report reads, “Climate change can indirectly increase risks of violent conflicts in the form of civil war and inter-group violence.” Environmental degradation can not only result in poverty, but can also lead to war.

Lack of Education

Education has lifted people out of poverty and empowered communities to grow economically. A lack of education could maintain or create poverty. Senior Fellow of the Center on Budget and Policy Priorities Jared Bernstein explains, “economists may disagree a lot on policy, but we all agree on the ‘education premium’—the earnings boost associated with more education.”

According to the Network for international policies and cooperation in education and training, a main priority for poverty reduction is primary education. In developed countries almost all children have access to primary education, while in regions such as sub-Saharan Africa approximately 40 percent of children do not attend primary school due to poverty and a lack of access to education. Many people living in poverty in undeveloped countries must give up an education in order to make “a minimal living.” Furthermore, many families cannot afford school fees to send their children to school. This limits skill development and opportunities to escape poverty and create generational poverty.

There are many situations that lead to poverty. As we understand the causes of poverty, we can eradicate it more strategically. These are only three of many causes that must be understood to successfully meet the goal of eradicating extreme poverty by 2030. We created poverty, so we can eliminate it as well.

– Christopher Kolezynski

Sources: Poverty at Large, The Borgen Project, Oxfam, The American Prospect, The Guardian, NORRAG
Photo: The Daily Star

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World’s Students Struggle with Loan Debt

loan debt
Fear not, American undergraduates. While we may have the single most expensive higher educational system in the developed world, students from all over are still accruing debt. You may have heard the statistics, or suffer from them personally: American student loan debt has rocketed to more than $1 trillion, and more than 7 million borrowers are currently in default. Yet, students from all over the world, from Japan to Britain, are also raking up expensive debt to receive an education.

While public university tuition is free in countries like Argentina, Iceland, Norway and Sweden, this does not always mean students finish their education with zero debt. In 2012, approximately 900,000 Swedish students received help from the government, totaling close to 22 billion krona (roughly $3.5 billion). Two-thirds of those funds were loans.

The average student loan debt for the U.K. is between €12,360 and €12,850, where more than 93 percent of students have received some form of financial assistance, accruing debt in the process. The country has even seen a staggering rise in suicide rates as a result of its student debt crisis. Between 2007 and 2011, the number rose to a devastating 50 percent.

In China, average tuition runs at about ¥40,000 annually, though the average family only makes about ¥3,000 per year. Japan, too, is saddled with increasing student loan problems. Between 2001 and 2011, the number of students applying for loans jumped to 70 percent, and 60 percent of its graduating student population since 2009 has been left underemployed or unemployed altogether.

While the United States’ position on student loan debt far surpasses the rest of the world, the global severity of the situation should not be overlooked. In the 21st century, the economy has become global-if one country is hurting, other countries will be affected, too. As student loan debt manages to climb, one can only hope the institutional problem will be fixed sooner, rather than later.

– Nick Magnanti

Sources: Huffington Post, Collegestats.org, Tuition.io
Photo: Boston

Soap Operas Tackle the Dirty Truth of Debt

soap_opera_social_change
Since those in extreme poverty have no line of credit (in some cases they have no state records whatsoever), they are sometimes forced to turn to loan sharks for quick cash. These loan sharks operate outside of the law and when it comes to payment, they have no mercy, often leaving the borrower in worse conditions than before the transaction.

In South Africa, this debt cycle has affected the poorest population. In the Johannesburg slum, Alexandra, loan sharks are easier to find than a job or sanitary facilities. Taking advantage of a desperate and uneducated population, loan sharks are able to make huge profits. As one Alexandra resident explains, the loan sharks hold identification cards as collateral and when their “customers” are unable to repay their loans, the ID cards are sold to refugees and emigrants from other parts of Africa.

With 18% of South Africans in debt (on record, not including those indebted to loan sharks), the World Bank is supporting a new strategy to reach and educate the public. Referred to as education entertainment, social issues are embedded into the existing storyline of a television show until the characters, and the viewers, are eventually guided to a solution. Rather than blatantly tell people what they should do- which is likely to meet resistance- advice is subtle and portrayed in the context of everyday life. Viewers are already familiar with the characters, and with the added appeal of emotion, soap operas serve as an ideal platform for credible information.

Scandal, one such show, reaches 3 million viewers in Johannesburg nightly, and its target audience is the low income population. This show has already tackled the issue of debt, with one character finding herself in a predicament then gathering information and arriving at a solution. Not only did the string of episodes warn of the negative consequences of debt, but the telephone number for a debt consolidation hotline was also displayed on screen. Following the debt-focused episodes, and for some time after, calls into the debt hotline increased 300%.

Although criticized for being overdramatic and unrealistic, soap operas have now become a resource for those struggling with poverty and other social issues. Soap Operas are a popular genre and the more viewers tune in, the more they empathize and relate to the characters on the show. By embedding useful information into soap operas, it is possible to educate an entire population without disturbing their nightly routine. Social issues associated with poverty can be combated with love triangles and scandals, thanks to education entertainment.

– Alessandra Luppi

Sources: World Bank, World Bank Blog