Debt
Debt is money owed: either the original sum borrowed or interest charges levied on the original sum. Debts can be both multilateral and bilateral. In absolute terms, the United States owes more than any other country. However, debt is a more serious problem for the world's poorest countries. The Human Development Report 2002 from the United Nations Development Programme (UNDP) shows that, among 50 African countries, at least 29 recently spent more on debt service than on health.
At present 41 countries are classified as heavily indebted poor countries (HIPCs) - 33 in Africa, four in Latin America, three in Asia and one in the Middle East. The main objective of the HIPC initiative is to reduce debt in these countries to a sustainable level, thereby releasing extra budgetary resources for poverty-reducing expenditure, including expenditure on health. The PRSP process is supposed to indicate how such monies are allocated.
Debt service is the process of repaying a loan according to an agreed schedule. High debt service payments are often blamed for reducing government revenue, and thus resources for health. As a result, there are increasing calls for debt relief, which is a term used to describe the process of either forgiving or reducing debts held by poor countries. Such relief may be a form of conditionality if linked to a requirement for domestic economic or social reform. Debt-for-health swaps, where there is an exchange of external debt for a promise by the government to finance domestic health projects, are an example. This can also be referred to as debt conversion.
The total debt of all developing countries in 1995 amounted to 41 per cent of their total gross national product (GNP), whereas the total net aid received was a mere 0.9 per cent of their total GNP. In Zambia, every citizen now owes the country's creditors US$790 - more than twice the average annual income. In Mozambique, the cost of debt servicing in 1994 equalled the budgets for health, education, police, and judicial systems combined.
The UNDP stated in 1997 that 21 million children's lives could be saved if the money used for debt service was put into health and education. In the same year, the World Bank stated that 44 low-income countries did not have the money to pay for basic minimum health services.
A fiscal deficit is the difference between a government's income (including aid grants but excluding loans) and expenditure. There is a deficit when the government spends more than it receives; this shortfall can be financed by borrowing from overseas, from domestic sources or from domestic commercial banks. The debt service of these debts can further exacerbate the deficit and put pressure on domestic health financing.