According to a recent United Nations report, global public debt reached a record high of $92 trillion in 2022, primarily due to governments borrowing money to combat crises like the COVID-19 pandemic. Developing countries are particularly affected by this burden. Over the past two decades, both domestic and external debt worldwide have increased more than fivefold, surpassing the rate of economic growth, which has only tripled since 2002. UN Secretary-General Antonio Guterres highlighted the adverse impact on people, especially in the world’s poorest nations, who are faced with the dilemma of servicing their debt or meeting the needs of their citizens.
Developing countries account for nearly 30 percent of the global public debt, with China, India, and Brazil representing 70 percent of that share. Among these nations, 59 face a debt-to-GDP ratio exceeding 60 percent, indicating high levels of debt. The report emphasized that debt has become a significant burden for developing countries due to limited access to financing, rising borrowing costs, currency devaluations, and sluggish economic growth.
The UN also criticized the international financial system, stating that it provides inadequate and expensive financing options for developing countries. The report highlighted that net interest debt payments exceed 10 percent of revenues for 50 emerging economies worldwide. Notably, in Africa, interest payments on debt exceed spending on education or health. Approximately 3.3 billion people live in countries where debt interest payments outweigh investments in essential sectors like health and education.
Private creditors, including bondholders and banks, hold 62 percent of developing countries’ total external public debt. In Africa, the involvement of private creditors increased from 30 percent in 2010 to 44 percent in 2021. Latin America has the highest ratio of private creditors holding external government debt among all regions, at 74 percent.
To address this crisis, the United Nations called for multilateral lenders to expand their financing and suggested measures such as temporarily suspending International Monetary Fund (IMF) surcharges and granting increased financing access to countries in debt distress. The report also emphasized the need for a debt workout mechanism to expedite progress on the G20 Common Framework, which was adopted by major economies and official creditors in October 2020 and aims to include non-Paris club members, including China, in debt relief efforts. However, the report did not provide specific details on how this mechanism should operate.
