3 This means that the context of high debt, high inflation, and low growth rates (with lowered employment expectations) could lead to the collapse of a third of the banks in the poorer nations. ‘Our updated global bank stress test shows that, in a severely adverse scenario, up to 29 percent of emerging market banks would breach capital requirements’, the IMF wrote in October 2022. Registering, in their own way, what is universally acknowledged as an intractable debt crisis in the poorer nations, the International Monetary Fund (IMF) warned that a serious banking crisis is likely to emerge (while ignoring the factors driving this scenario). Growth rates shrank, which meant that debt volumes ballooned, and so these governments decided to borrow more and adopt deeper austerity policies, which dramatically increased the debt burden on their populations. 2 When the pandemic struck, countries that had adopted the World Bank-International Monetary Fund policy to grow their way out of the debt crisis floundered. ‘Among the thirty-three sub-Saharan countries in our sample’, the World Bank noted, ‘current spending outstripped capital investment by a ratio of nearly three to one’. Rather, these governments borrowed money upon borrowed money to pay off older debts to wealthy bondholders as well as to pay for their current bills (such as to maintain education, health, and basic civic services). The debt crisis did not take place because of government spending on long-term infrastructure projects, which could eventually pay for themselves by increasing growth rates and allow these countries to exit from a permanent debt crisis. In sub-Saharan Africa, for example, debt increased by 27 percent of GDP on average’. Between 20, the World Bank reported, ‘public debt in a sample of 65 developing countries increased by 18 percent of GDP on average – and by much more in several cases. Before the pandemic was announced by the World Health Organisation in March 2020, the poorer nations of the world already struggled with seriously high – and unpayable – levels of debt.
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