Faith Nyasuguta
Global public debt surged to a record $97 trillion last year, according to a report by the United Nations on June 4. This alarming increase has significantly impacted developing countries, which owe approximately one-third of this debt, hampering their ability to fund essential government services such as healthcare, education, and climate action.
The report, titled “A World of Debt,” was released by the U.N. Conference on Trade and Development (UNCTAD). It highlighted that government debt rose by $5.6 trillion from 2022. The report emphasizes that high interest payments are now surpassing growth in crucial public spending.
“Developing countries must not be forced to choose between servicing their debt or serving their people,” the report emphasized. “The international financial architecture must change to ensure a prosperous future for both people and the planet.”
One in three developing countries, home to 3.3 billion people, spends more on paying interest than on critical programs for human development such as healthcare, education, and climate action. In 2023, public debt in developing countries reached $29 trillion, accounting for about 30% of the global total. This is a significant increase from the 16% share in 2010.
UNCTAD attributed the rapid increase in global public debt to “cascading crises” and the sluggish, uneven performance of the global economy. This debt is rising at twice the rate in developing countries compared to richer nations.
The United States topped the list with over $33 trillion in public debt last year, followed by China with nearly $15 trillion, and Japan with $10.6 trillion. Among developing countries, Egypt, Mexico, Brazil, and India also carried significant public debt.
African economies have been particularly jolted by global shocks, with median public debt as a share of economic output rising to 62% last year. The cost of borrowing increased worldwide last year, causing interest on public debt to jump to $847 billion, up 26% from two years earlier.
In a bid to address this crisis, U.S. President Joe Biden and Kenyan President William Ruto recently called for global efforts to reduce the enormous debt burden on developing nations. They advocated for reducing financing barriers and coordinating debt relief through multilateral financial institutions.
A significant step was taken in March when the U.S. Congress passed a $1.2 trillion government funding bill, allowing the U.S. to lend up to $21 billion to an International Monetary Fund trust that provides zero-interest loans to support low-income countries.
“Too many nations are forced to make a choice between development and debt, between investing in their people and paying back their creditors,” Biden stated.
The African Union, now a permanent member of the G20, has also been vocal on this issue. South Africa is set to assume the G20 presidency in December and has indicated it will use this opportunity to champion the aspirations of emerging markets.
The report by UNCTAD stresses the urgency for international financial reforms to prevent developing countries from having to choose between debt servicing and critical investments in their people and future. The call for a revamped financial system aims to ensure a more equitable and sustainable future for all nations.
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