JOHANNESBURG, (Reuters) – Developing countries pay more for debt service than ever before. A leading debt campaigner stated Monday that a higher interest rate in the United States could lead to a greater burden.

The economic downturn caused by the pandemic has had a devastating effect on many developing countries. Even though wealthy creditors countries gave temporary relief to the least fortunate through the Debt Service Suspension Initiative(DSSI), now that this programme has ended, governments will need to resume paying.

Jubilee Debt Campaign in Britain issued this warning. This was in line with a World Bank appeal to action from earlier this month, where it stated that approximately 60% of low-income countries were either at or very high risk of default due to pandemic.

Heidi Chow, Jubilee Executive Director, stated in a statement that the debt crisis is still engulfing lower-income countries. There’s no way to stop it unless we take urgent debt relief measures.

Jubilee data showed that debt payments from developing countries rose 120% between 2010-2020, their highest point since 2001.

In 2021, the average government debt payment represented 14.3% of total government revenues. This is more than twice as much as in 2010, which was 6.8%.

Markets are anticipating four rate increases for the year by the U.S. Federal Reserve, which is scheduled to be held this week.

Rising Fed rates are likely to make borrowing more costly for emerging markets countries. They will have to price their debt at a premium to attract investors.

Jubilee reports that 54 countries worldwide are in debt crisis. That means debt payments threaten the governments’ ability to safeguard the fundamental economic and social rights their citizens.

According to the group, Kenya and Malawi entered debt crises this year. There are 14 more countries that could face a public or private debt crisis.

World Bank President David Malpass https://www.reuters.com/article/world-bank-outlook-malpass-idUSL1N2TR18V this month warned that slow progress on debt relief for developing countries increased risks for their economies and made sovereign defaults more likely.

Last year, the International Monetary Fund (IMF) approved a special allocation of $650 billion worth special drawing rights https://www.reuters.com/article/us-g20-finance-imf-reserves-idUSKBN2F404Q – the Fund’s unit of exchange backed by dollars, euros, yen, sterling and yuan.

This measure was designed to increase global foreign currency reserves in the face of the COVID-19 pandemic.

About $275 billion are allocated for low-income and emerging markets.

The IMF is also proposing a $50 billion Resilience and Sustainability Trust https://blogs.imf.org/2022/01/20/a-new-trust-to-help-countries-build-resilience-and-sustainability that will allow qualifying countries to borrow reallocated SDRs.