Unchecked public debt fuels corruption and bad governance. A polycrisis is the simultaneous occurrence of several catastrophic events, and that is exactly what we see with global public debt. Over the past several years many countries are reaching an overwhelming debt distress.
May 17 (DPnet).– Governments are spending an increasing percentage of their budgets on debt repayment, which keeps them from making investments in the expansion and development of their countries. According to a recent survey, debt servicing costs are 2.5 times higher than education expenditures and 3.7 times higher than healthcare costs across the globe. Governments that attempt to address the issue by cutting back on public spending adversely impact disadvantaged populations and may experience greater rates of service reductions and layoffs.
As a result of populist policies aimed at satisfying the desires of the population without any consideration for the consequences, 3.3 billion people worldwide currently reside in nations where the government spends more on debt repayment than on healthcare or education. This implies that when the amount of debt eventually becomes unpayable and causes a widespread bankruptcy of the economy, the affluence of today will eventually turn into severe impoverishment in the world of tomorrow.
Moreover, public debt information is often inaccessible, obscuring the crisis's extent. At the 2024 World Bank Spring Meetings, experts highlighted the need for debt transparency, presenting the Civil Society Debt Transparency and Accountability Checklist. This tool, developed by the National Democratic Institute and by Transparency International, aids citizens in assessing public debt practices. It highlights the role of lenders, the unequal effects of debt, and its usage in corruption. By improving debt transparency, the checklist hopes to enable civil society to push for improved governance and lower debt burdens.
Despite the known macroeconomic benefits of debt transparency, such as reduced borrowing costs and increased investor confidence, few countries have adequate legal frameworks for debt transparency, according to a new report from the IMF. In addition, debt is a tool, unfortunately, that kleptocrats use to, in fact, perpetuate their power.
The new Civil Society Debt Transparency and Accountability Checklist developed by the National Democratic Institute (NDI) is a new tool offering civil society organizations a simple way to assess how transparent their country’s public debt is and advancing recommendations on how to strengthen the public debt legal and institutional framework. In order to provide a comprehensive but accessible guide to users, the checklist outlines 13 transparency and accountability principles and 59 good practices in debt management.
Civil society organizations can use this tool for multiple purposes:
- To learn more about how governments acquire and manage public funds
- To monitor government borrowing and debt management practices
- Identify gaps in legislation
- Assess the level of access to debt information
- Design advocacy campaigns
- As an entry point for discussions with policymakers and the government
- And to raise awareness amongst the public
In short, we must realize that our world's future is acutely ominous, pointing to an economic and financial catastrophe if strict measures are not taken soon to curb the abusive rise in public debt. Tax hikes alone are rarely enough to stimulate the economy and pay down debt. Governments often issue debt in the form of bonds to raise money, but they must pay an increasing interest rate as the debt accumulates. Therefore, they must implement spending cuts and tax hikes combined that have helped lower the deficit in the past and must be applied to solve the problem.
However, most citizens often waver in their opinions about the need to balance the budget by cutting government spending. These cuts often culminate in reductions in some benefits and higher unemployment while the economy reaches a new balance. But most citizens prefer to have a better life now without worrying about the disaster they are creating by supporting policies promoting deficit budget spending that accumulates until the economy collapses into a horrible recession.
In truth, governments may be corrupt or grab power with this largesse, but we are all responsible.