Infant mortality rises when sovereign debt defaults drag on, study says

REUTERS: Infant mortality rises and life expectancy falls when sovereign debt defaults are not quickly resolved, a study said yesterday, as negotiations to restructure the debts of countries including Zambia, Sri Lanka and Ghana drag on.

In countries that have come out of default within three years since 1900, infant deaths were 2.2 percentage points higher than if they had not defaulted, according to the study by researchers Clemens Graf von Luckner and Juan Farah-Yacoub.

In defaults that dragged on for more than three years and lasted for an average of a decade, infant mortality was 11.4 percentage points higher, they found. Life expectancy was 1.5 percentage points lower, on average, a decade after a default, with the figure worsening for longer instances.

The COVID-19 pandemic tipped a number of countries, including Zambia into default, while rising global interest rates and inflation fuelled by Russia’s invasion of Ukraine pushed others over the edge. In response to the pandemic in 2020, G20 nations launched the ‘Common Framework’ restructuring process. It has been used by Zambia, Ethiopia, Chad and Ghana but has yet to secure a resounding success, with China and multiple commercial creditors complicating negotiations.

“The outstanding issues on Zambia are entirely political, it’s entirely about the Chinese and the U.S. putting aside other differences and getting this done,” said Mark Malloch Brown, President of the Open Society Foundations, which published the study. “It’s the fault of a wider system of big powers rarely having the uninterrupted commitment and prioritisation to get a small country’s debt problem dealt with when they’ve both got significant interests and face at stake.”

Zambia’s bilateral creditors expect to make a debt restructuring proposal this week to the southern African country, an official with the Paris Club, which coordinates developed creditor nations, told Reuters on Monday.

Western officials have blamed China for delaying the resolution of Zambia’s debt restructuring, something its officials have denied.