UNCTAD Releases Debt Report 2025,
Developing Countries Borrow at Two to Four Times Interest Rate Compared to US
·
Public debt can be vital for development. Governments use
it to finance expenditures, protect and invest in their people and pave the way
to a better future. However, when public debt grows excessively or its costs
outweigh its benefits, it becomes a heavy burden. This is precisely what is
happening across the developing world today.
·
Global public debt reached a record high of $102 trillion
in 2024.
·
Developing countries accounted for less than one third of
the total – $31 trillion – it has grown twice as fast as in developed economies
since 2010.
·
Asia and Oceania hold 24% of global public debt
·
Half of developing countries were paying at least 6.5% of
export revenues to service external public debt.
·
High borrowing costs, which increase the resources needed
to pay creditors, making it difficult for developing countries to finance
investments. Since 2020, developing regions have been borrowing at rates that
are two to four times higher than those for the United States.
·
In 2023, they paid $25 billion more to their external
creditors in debt servicing than they received in fresh disbursements,
resulting in a negative net resource transfer.
·
Vein, a record 61 developing countries allocated 10% or
more of government revenues to interest payments.
·
A total of 3.4 billion people live in countries that spend
more on interest payments than on either health or education.
Global public debt reached a record high
of $102 trillion in 2024.
Although public debt in developing countries accounted
for less than one third of the total – $31 trillion – it has grown twice as
fast as in developed economies since 2010.
There is
a stark contrast among developing regions. Asia and
Oceania hold 24% of global public debt, followed by Latin America and the
Caribbean (5%), and Africa (2%). The burden of this debt varies significantly
based on the price and maturity of the debt finance countries have access to,
and is further exacerbated by the inequality embedded in the international
financial architecture.
Developing
countries are now facing a high and growing cost of external public debt. Debt
service on external public debt reached $487 billion in 2023. Half of developing countries were paying at least 6.5% of
export revenues to service external public debt.
This
dynamic is largely a result of high borrowing costs,
which increase the resources needed to pay creditors, making it difficult for
developing countries to finance investments. Since 2020, developing regions
have been borrowing at rates that are two to four times higher than those for the
United States.
Moreover,
developing countries experienced a net resource outflow for the second year in
a row. In 2023, they paid $25 billion more to their
external creditors in debt servicing than they received in fresh disbursements,
resulting in a negative net resource transfer.
The
impact of these trends on development is a major concern, as people pay the
price. Persistently high interest rates, weak global economic prospects and
heightened uncertainty are having a direct impact on public budgets. Developing
countries’ net interest payments on public debt reached $921 billion in 2024, a
10% increase compared to 2023. In the same vein, a
record 61 developing countries allocated 10% or more of government revenues to
interest payments.
Developing
countries’ interest payments are not only growing rapidly but also outpacing
growth in critical public expenditures, such as on health and education. As a
consequence, in many developing countries, the need to service existing
obligations is constraining spending in other key areas essential for
sustainable development.
Developing
countries must not be forced to choose between servicing their debt or serving
their people. There is a pressing need to reform the international financial
architecture, encompassing:
1.
Making
the system more inclusive and development-oriented
2.
Enhancing
the availability of liquidity in times of crisis
3.
Creating
an effective debt workout mechanism that addresses current deficiencies
4.
Providing
more and better concessional finance and technical assistance to support
countries in tackling the high cost of debt
The world
has long been talking about reform. It is time to move from conversation to
action.
Key
statistics
$ 31 trillion - Developing countries’ public debt in 2024
$ 921 billion - Developing countries’ net interest payments on
public debt in 2024
61 developing countries - Spend more than 10% of government revenues on
net interest payments
$ 25 billion - Negative net resource transfer of developing
countries in 2024, paying more to external creditors than they received in new
disbursements
46 developing countries - Spend more on interest payments than on either
health or education
3.4 billion people - Live in countries that spend more on interest
payments than on either health or education