projected to absorb a growing share of the limited revenue base of low-income countries, diverting public spending from domestic SDG recovery priorities. By way of illustration, 49 countries eligible for support from the from the Debt Service Suspension Initiative are projected to spend more on debt servicing in 2021 than on public health (figure 9).
25 20 15 10 5 0
Mongolia Angola Lao PDR Cameroon Zambia Mozambique Papua New Guinea Cambodia Senegal Tajikistan Congo, Rep Yemen, Rep Nigeria Djibouti Uzbekistan Uganda Chad Rwanda Guinea-Bissau Mauritania Benin Bhutan Ethiopia Gambia, The Rep. of Moldova Bangladesh Nicaragua Grenada Comoros Côte d'Ivoire Ghana Myanmar Congo, Dem Rep Fiji Tanzania, United Rep Cabo Verde Guinea St. Vincent & Grenadines Solomon Islands Mali Central African Republic Kenya Maldives Togo Honduras Sierra Leone Dominica Samoa Tonga
Debt service as a multiple of government spending on health
FIGURE 10. Countries spending more on debt servicing than health in 2021
Source: Debt Service: World bank, International Debt Statistics/ DSSI (October 2021), Spending on Health (share of GDP): WHO (latest data for 2018), GDP in current prices: IMF, World Economic Outlook (October 2021)
Overall development finance flows were falling before and contracted sharply during the pandemic, which is the opposite of what an SDG financing approach would require. Net financial flows (debt plus equity) to developing countries (excluding China) contracted by 26 percent in 2020, exacerbating liquidity constraints and limiting fiscal space. The headline figure conceals a complex underlying picture (table 4). Equity flows and bank lending fell sharply, while multilateral institutions expanded lending (see below). Bond issuance also increased sharply, but this was almost entirely due to China. Issuance by low- and middle-income countries fell by 11 percent, and effectively collapsed in sub-Saharan Africa as credit agencies revised their risk ratings.93 In effect, bond markets priced African Governments out of markets at precisely the moment when borrowing could have financed urgently needed investments in priority SDG areas.
93
The global spread for African issuers spiked to more than 1,000 basis points (bp) in late March (more than double the level a month earlier) before falling back to about 600 bp by late November 2020.
CHAPTER 4. FINANCING FOR AN SDG RECOVERY: BRIDGING THE GAP
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