The debt crisis in Greece has gained the world’sattention. However, some activists say many othercountries are building up dangerous levels of debt. Theysay private investors are lending money to thosecountries without enough rules or legal safeguards.

European officials avoided one financial crisis recently. Greece reached a dealwith other European countries to meet its short-term loan obligations lastweek. The Greek government is expected begin negotiations on a three-yearplan, valued at over $90 billion, to deal with its international debt.

Greece reached an agreement with Europe on its debt. But debt campaigners say many developing countries are falling into a debt trap. (AP Photo/Thanassis Stavrakis)

Debt activists say there is the possibility of a debt crisis in other areas,especially in the developing world. Tim Jones is with a British group called theJubilee Debt Campaign. It studies debt owed by countries around the world. This month, the group released a report called, “The new debt trap: How theresponse to the last global crisis has laid the ground for the next”.

Mr. Jones says an increase in lending to poor countries has become aproblem.

“There’s a huge boom in lending happening, especially in some of the mostimpoverished countries in the world at the moment. So we’re worried thatunless action is taken, they could end up in new debt crises again.”

Mozambiqueis among the countries the report describes as facing a possibledebt crisis.

“Its economy has been booming massively. It’s had huge amounts of lendingto the country, but actually poverty is increasing at the same time, andinequality is increasing. So the loans are not necessarily helping in tackling theproblems of the country.”

The Jubilee Debt Campaign says the total amount owed by debtor countriesrose 30 percent, from 2011 to 2014, to $13.8 trillion. It predicts that amount willgrow to $14.7 trillion dollars this year.

The group says 22 countries are currently in a debt crisis. Many more face ahigh risk of financial problems in their public or private sectors.

Judith Tyson is with the Overseas Development Institute, a public policy groupbased in London. She told VOA on Skype that the current debt problems areall tied to the financial crisis of late 2007 and 2008.

While the world financial crisis hurt many countries, some have struggled withdebt for 20 years or more. Jamaica, Tim Jones says, is one example.

“If we take Jamaica, their debt crisis first began in the 1970s. And actuallysince the 1990s they’ve had huge government surpluses, but the debt hasremained because the interest is just so high, and the economy has beendepressed in the attempt to pay these debts. And it just shows you can’t getout of a debt crisis by making cuts.”

The Greek government made a similar argument during negotiations over itsfinancial rescue plan. However, European countries, led by Germany, havecalled for continued spending cuts and reforms.

Greecereached a deal so that the country will stay in the Eurozone, the groupof nations that use the euro as their currency. But for developing nations, TimJones says, there is additional risk when a nation’s currency loses valuecompared to other currencies because of high debt.

“The debts are all owed in foreign currencies, like the dollar or the euro. Andso when a country has a currency devaluation, then the debt paymentsshoot up.”

So as debt grows, so do the risks.

Debt campaigners are calling for tighter controls of international lending andcancelling some loans for countries already in crisis.

I’m Mario Ritter.

Henry Ridgwell reported on this story for VOANews.com. Mario Ritter adaptedit for Learning English. George Grow was the editor.

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Words in This Story

obligation(s)– n. something that is required to be done by rule, law orexpectation

sector(s)– n. a different part of a larger whole;

surplus– n. more than enough; an extra amount

currency– n. money as a form of exchange

devaluation– n. the loss in value of one kind of money compared to othercurrencies either because of a crisis or by government policy