Debt crisis highlights urgent need for restructuring
As Commonwealth leaders convened in Antigua, an escalating crisis continues to threaten the well-being of populations within many member countries, reports BritPanorama.
This crisis is depriving children of an education and denying access to essential healthcare services. The UK’s pivotal role in the international financial system places it in a unique position to address these troubling challenges.
The specific issue at hand is an overwhelming burden of sovereign debt. Research from Debt Justice reveals that nine Commonwealth nations allocate more funds to interest payments than to health or education services. Another six nations are similarly impacted, spending more on debt than on healthcare, underscoring a problem of significant moral concern.
Factors such as ongoing conflicts in the Middle East and Ukraine have exacerbated soaring interest rates, compounding the difficulties faced by low-income countries. This situation has led to reduced access to healthcare and vital medications, leaving children without education opportunities.
Zambia, in particular, has felt the sting of this debt crisis, with expenditure on education reduced by a staggering 32 percent since 2015.
Resolving the debt crisis is not just necessary but may be transformative. Debt Justice indicates that limiting debt payments to 10 percent of government revenues for the 21 Commonwealth countries currently in distress could keep nearly 9.8 million children in school. Additionally, increased healthcare funding could save approximately 115,000 infants and 13,000 mothers if medical care is properly funded.
Yet, without real debt restructuring, these positive outcomes remain out of reach. In the past, sovereign nations primarily financed loans to lower-income countries. Today, the private sector has become the predominant lender, with 90 percent of these debts governed by English law owing to the influence of the City of London.
The Zambian High Commissioner has pointed out that this situation provides the UK with “extraordinary power to set fair standards in restructuring these debts.”
Prime Minister Andy Burnham has committed to launching a new initiative aimed at debt reform. This is a welcome development; however, it is essential for the government to reassess domestic legislation governing the treatment of low and middle-income countries struggling with debt.
Current English law allows for the legal pursuit of debts in totality, including accrued interest. In 2025, South Sudan was ordered by an English court to pay $657 million in loans, a sum that equated to about 47 percent of its government revenue, all while over seven million people faced food insecurity.
This legal framework enables private creditors to delay or refuse to engage in the debt restructuring process, compelling countries like Ethiopia into unfavourable deals that further suppress their economies.
The rationale for elevated interest rates is questionable if creditors are guaranteed return on their investments. Reforming the laws to restrict creditor claims to amounts realistically anticipated through restructuring efforts could offer a fairer approach.
A debt justice framework would ensure equitable treatment for all creditors. It would address the predatory practices of vulture funds, which scour for risky debts while employing aggressive tactics to enforce repayment.
While borrowing itself is not inherently negative and is often necessary for infrastructure development, the current system has spiralled into unfairness.
There is cautious optimism regarding the Prime Minister’s forthcoming announcement, as it may herald meaningful progress in tackling debt challenges. Establishing a financial system that bolsters lower-income countries could foster resilient economies and enhance public service capabilities.
Establishing a just financial system is imperative to bringing about lasting change, and it is time for the UK to advance a debt justice law to address this pressing crisis.
Bambos Charalambous is the Labour MP for Southgate and Wood Green.
