The UN Global Crisis Response Group on Food, Energy, and Finance (GCRG), the UN Conference on Trade and Development (UNCTAD), and the five UN regional commissions published a report warning that global public debt increased more than fivefold over the past 20 years, reaching a record high of USD 92 trillion in 2022. The weight of debt, it argues, compromises developing countries’ ability to respond to emergencies, address climate change, and invest in sustainable development.
Titled, ‘A World of Debt: A Growing Burden to Global Prosperity,’ the report finds that developing countries owe almost 30% of global public debt, roughly 70% of which is attributable to China, India, and Brazil. It notes that public debt has risen faster in developing countries than in developed countries, mainly due to growing development financing needs, global crises such as the COVID-19 pandemic, the growing cost of living, climate change, and limited alternative sources of financing. According to the report, the number of countries dealing with high levels of debt has increased from 22 in 2011 to 59 countries in 2022.
The report highlights inequalities in the global financial architecture that, it argues, “exacerbate…the negative impact of cascading crises on sustainable development” because developing countries:
- Borrow from foreign creditors, which increases their vulnerability to external shocks;
- Rely on private creditors, which makes credit expensive and debt restructuring complex; and
- Pay much more for their debt than developed countries.
A total of 52 countries – almost 40 percent of the developing world – are in serious debt trouble.
— UN Secretary-General António Guterres
As a result, the report maintains, developing countries are facing “impossible choices” as interest payments are growing faster than other public expenditures. It shows that some regions spend more on servicing debt than on education or healthcare. For example, African countries’ interest spending is higher than that on either education or health. Developing countries in Asia and Oceania (excluding China) spend more on interest payments than on health. In Latin America and the Caribbean (LAC), developing countries are allocating more funds to interest payments than to investment.
This situation, the report argues, must change, and the SDG Stimulus and Our Common Agenda (OCA) policy brief titled, ‘Reforms to the International Financial Architecture,’ show a way forward by calling for:
- Making the international financial system more inclusive;
- Tackling the high cost of debt and rising risk of debt distress and creating a debt workout mechanism;
- Providing greater liquidity in times of crisis and expanding contingency finance; and
- Massively scaling up affordable long-term financing.
The report was launched on 12 July 2023, in the margins of the UN High-level Political Forum on Sustainable Development (HLPF). [Publication: A World of Debt: A Growing Burden to Global Prosperity] [UNCTAD Report Page] [UN Press Release] [UN Secretary-General’s Remarks During Report’s Launch]