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52 countries – almost 40 percent of the developing world – are in serious debt trouble
by Global Crisis Response Group, UNCTAD, agencies
6:21am 18th May, 2023
July 2023
3.3 billion people now live in countries where debt interest payments are greater than expenditure on health or education. (UN Global Crisis Response Group)
The United Nations Secretary-General Antonio Guterres today presented the report “A world of debt. A growing burden to global prosperity” and issued a grave warning as global public debt reached an all-time high of $92 trillion in 2022.
This five-fold surge in public debt levels since 2000 demands immediate action to tackle the escalating crisis affecting developing countries in particular.
United Nations Secretary-General Antonio Guterres:
"Half our world is sinking into a development disaster, fuelled by a crushing debt crisis. That is the main message of the report we are presenting today: A World of Debt.
Some 3.3 billion people – almost half of humanity – live in countries that spend more on debt interest payments than on education or health.
And yet, because most of these unsustainable debts are concentrated in poor countries, they are not judged to pose a systemic risk to the global financial system. This is a mirage.
3.3 billion people is more than a systemic risk. It is a systemic failure. Markets may seem not be suffering – yet. But people are.
Some of the poorest countries in the world are being forced into a choice between servicing their debt, or serving their people.
They have virtually no fiscal space for essential investments in the Sustainable Development Goals or the transition to renewable energy.
Levels of public debt are staggering – and surging. In 2022, global public debt reached a record $92 trillion US dollars. Developing countries shoulder a disproportionate amount.
A growing share is held by private creditors who charge sky-high interest rates to many developing countries. On average, African countries pay four times more for borrowing than the United States and eight times more than the wealthiest European countries.
The International Monetary Fund says 36 countries are on so-called “debt row” – either in, or at high risk of, debt distress. Another sixteen are paying unsustainable interest rates to private creditors.
A total of 52 countries – almost 40 percent of the developing world – are in serious debt trouble.
It is one result of the inequality built into our outdated global financial system, which reflects the colonial power dynamics of the era when it was created.
The system has not fulfilled its mandate as a safety net to help all countries manage today’s cascade of unforeseen shocks – the pandemic; the devastating impact of the climate crisis; and the Russian invasion of Ukraine.
Debt is an important financial tool that can drive development and enable governments to protect and invest in their people.
But when countries are forced to borrow for their economic survival, debt becomes a trap that simply generates more debt.
Today’s report is our most detailed picture yet of this unfolding debt crisis, with a wealth of comparisons and context.
It also sets out our roadmap to global financial stability – a roadmap already put forward in our Policy Briefs on reforms of the Global Financial Architecture and the SDG Stimulus.
Deep reforms to the global financial system will not happen overnight. But there are many steps we can take right now.
Our proposals include an effective debt workout mechanism that supports payment suspensions, longer lending terms, and lower rates, including for vulnerable middle income countries.
Governments can agree right now to scale up development and climate finance by increasing the capital base and changing the business model of Multilateral Development Banks.
They can enable much stronger coordination between the banks, to transform their approach to risk without losing their triple A credit rating, so that they can massively leverage private finance at affordable cost to developing countries.
The Bridgetown Agenda led by Prime Minister Mia Mottley of Barbados is one such important proposal. The upcoming G20 Summit is an opportunity to take these ideas forward.
Action will not be easy. But it is essential, and urgent. Today’s report shows that time is up for 3.3 billion people.
June 2023
UN experts back draft New York bill to ensure effective and fair debt relief. (OHCHR)
UN experts have called on New York State authorities to adopt legislation designed to ensure that private creditors participate in international debt relief efforts on similar terms as public lenders.
“This bill is a golden opportunity that will allow countries in debt distress to shift their budgetary priorities and, by providing for better living conditions, reduce the risks for investors in these countries and create better opportunities,” said the Special Rapporteur on extreme poverty and human rights, Olivier de Schutter, and the Independent Expert on foreign debt and human rights, Attiya Waris.
The experts welcomed the proposed “New York Taxpayer and International Debt Crises Prevention Act” currently under discussion: a legislation that would compel private sector creditors to participate in debt restructurings of distressed low- and middle-income countries on the same terms as public creditors. The expert on foreign debt expressed support for the proposed legislation in a letter to the US Government in April 2023.
“The proposed law would have a major impact in ensuring that States can protect the economic, social and cultural rights of their people instead of paying for unsustainable debts,” they said. In 2021, low- and middle-income countries reportedly spent an average of 27.5 per cent of their budgets on interest and debt repayments - more than was spent on education, health and social protection combined.
The experts pointed out that 60 per cent of developing country debt is held by private creditors and that New York law governs 52 per cent of this global debt.
“If taxpayers contribute to public debt relief, private creditors should be obliged to participate on the same terms,” they said. “Debt relief must be effective and fair for all, and its costs must be shared by private creditors as well.”
The experts stressed that COVID-19, the energy crisis, rising food prices and inflation have led to an increase in unsustainable debt for many countries, with a particular impact on developing countries.
“Without debt relief, it would be impossible to make progress towards the UN Sustainable Development Goals, which have already suffered a serious setback due to the pandemic and increasing international crises,” they said.
“Many poor people can barely afford food and minimum dietary needs for health. It is precisely in times of crisis that States must be able to ensure social protection and food security for all people in their country,” the experts said. “Everyone has an interest in countries being able to invest in social protection, health care, housing, education and food security, instead of devoting more and more of their limited budgets to debt repayments.”
22 June 2023
Developing countries are buckling under high debt and exorbitant borrowing costs, that prevent them from reviving their economies, UN chief Antonio Guterres said on Thursday.
Speaking at the Paris Finance Summit, Mr. Guterres said many African States were spending more on debt repayments than on desperately needed healthcare, and that over 50 countries were either in default or “dangerously” close to it.
The UN chief called for a debt relief mechanism that supports payment suspensions, longer lending terms and lower rates to make borrowing more affordable for poorer nations, as well as increased access to liquidity for developing countries via the International Monetary Fund’s Special Drawing Rights.
Mr. Guterres also repeated his urgent call to end fossil fuel subsidies and increase climate adaptation funding for vulnerable countries.
“Taken together, these steps would help to beat poverty and hunger, uplift developing and emerging economies, and support investments in health, education and climate action,” he said, stressing that the measures would enable a “giant leap” towards global justice.
Doing nothing is simply not an option and at the halfway point to reaching the 17 Sustainable Development GoalsOpens in new window (SDGs) they are “drifting further away by the day”, he warned delegates to the Summit for a New Global Financing Pact.
He said it was clear the international financial architecture built in the aftermath of World War Two “has failed in its mission to provide a global safety net for developing countries.
“It essentially reflects, even with some changes, the political and economic power dynamics of that time”, when three quarters of today’s nations weren’t around the table at Bretton Woods.
“Nearly 80 years later, the global financial architecture is outdated, dysfunctional, and unjust. It is no longer capable of meeting the needs of the 21st century world: a multipolar world characterized by deeply integrated economies and financial markets. But also marked by geopolitical tensions and growing systemic risks.”
He warned the current global financial system exacerbates inequalities, denying the poorest countries the credit and debt support they need and deserve.
European citizens received nearly 13 times more than African citizens under current rules for Special Drawing Rights to weather recent crises, a situation that is “profoundly immoral” said Mr. Guterres.
“A financial architecture which does not represent today’s world is at risk of leading to its own fragmentation in a world where geopolitics is in itself a factor for fragmentation.
“There will be no serious solution to this crisis without serious reforms.” He said change would not happen fast and was a question of power and political will.
“But as we work for the deep reforms that are needed, we can take urgent action today to meet the urgent needs of developing and emerging economies.”
He said richer nations could establish “a really effective and time effective debt relief mechanism that supports payment suspensions, longer lending terms and lower rates, including for middle income countries with particular vulnerabilities, namely in relation to climate.”
Development and climate finance can be better capitalized, and development banks reformed, allowing better coordination. He said credit rating agencies had become “deeply biased” and contributed to many of the recent financial crises, rather than helping avoid them.
He said taking immediate action towards wholesale reform could curb hunger, “uplift developing and emerging economies, and support investments in health, education and climate action.”
Apr. 2023
Lower income country debt payments to hit highest level in 25 years. (Debt Justice)
Lower income country debt payments in 2023 will hit the highest level since 1998, according to figures released by Debt Justice this week. External debt payments for 91 countries will average at least 16.3% of government revenue in 2023, rising to 16.7% in 2024, an increase of over 150% since 2011.
Higher debt payments are linked to falling public spending. The last time payments were so high, world leaders created a debt relief scheme for the most indebted lower income countries, which led to 60%-80% of their debts being cancelled.
Heidi Chow, Executive Director of Debt Justice said:
“Debt payments are reaching crisis levels in many countries, hindering the ability of governments to provide public services, fight the climate crisis and respond to economic turmoil. There’s no time to waste, we urgently need fast and comprehensive debt relief schemes across all external creditors, including legislation in the UK and New York to make private lenders take part in debt cancellation.”
Mae Buenaventura of the Debt Justice Program of the Asian People’s Movement on Debt and Development (APMDD) said:
“Debt payments drain Southern countries of much needed development financing to protect its citizens from the ever worsening economic and climate crises. Recent developments in Pakistan and Sri Lanka demonstrate how current international debt mechanisms are spectacularly failing to provide the deep, wide, equitable and permanent debt reduction to prevent the deterioration of living conditions by peoples of the South. Without debt cancellation, Southern debts will continue to rise and along with it, the continued hemorrhage of development finance.”
The figures are for 91 countries classified as low or lower middle income by the World Bank, or as a Small Island Developing State by the UN, where data is available. Countries with scheduled external debt payments over 30% of government revenue between 2022-2024 include Sri Lanka, Laos, Pakistan, Zambia and Dominica.
According to the World Bank, for the countries covered in the analysis, of their external debt payments in 2023 and 2024: 46% are to private lenders; 30% are to multilateral institutions; 12% are to Chinese public and private lenders; 12% are to other governments..
Apr. 2023
New research by humanitarian organisation, ActionAid International, has revealed a shocking 93% of countries at the forefront of climate disasters are drowning in debt. The organisation is calling for the most climate vulnerable countries to have their debts cancelled, along with a radical reform of the way global debt is managed, to stop this crisis.
With countries forced to pay back their debts to the World Bank, International Monetary Fund (IMF) and private banks before spending on anything else, the new research raises worrying questions about how these countries are affording to rebuild, adapt and mitigate against frequent and intensifying climate disasters.
The newly published policy brief ‘The vicious cycle: The links between debt crisis and climate crisis’ by ActionAid found:
Nine countries most vulnerable to climate change including Somalia, Malawi and Mozambique are already in debt distress. 40 climate vulnerable countries are at moderate or high risk of debt distress. Only four countries being impacted by climate disasters are at low risk of debt distress.
Malawi is a country ravaged by the recent Cyclone Freddy which displaced more than half a million people and destroyed buildings, roads and homes.
Pamela Kuwali, Country Director at ActionAid Malawi, said: “Malawi faces a debt which is nearly two thirds of its gross domestic product which means instead of our government being able to channel vital finances to rebuild and recover after Cyclone Freddy, instead to we are being forced to pay back old loans. Our hands are tied, and all the while climate disasters are becoming ever more intense and destructive. This can’t continue, and it will be women and girls who suffer the impact the most.”
The research also found that 38 out of 63 most climate vulnerable countries are already spending so much on debt servicing, they are likely to be cutting spending on public services.
John Nkaw, Country Director at ActionAid Ghana, said: “Ghana is having to spend more on servicing its debt than it spends on education and health. It’s a vicious cycle because cutting public expenditure means the country doesn’t have as many resources to respond to climate disasters when they do hit. We can’t invest in adaptation or resilience, and we can’t appropriately prepare for or respond to climate-induced disasters.
“We know that Ghana will need about 60% of its debt cancelled if it is to return to a path of sustainability – therefore we demand a proportion of debt cancellation. If freed of debt, we would be able to strengthen small and medium sized businesses, invest in renewable sources of energy, smallholder farmers and agroecology. But these choices aren’t an option.”
Mar. 2023
Breaking the Cycle of Unsustainable Food Systems, Hunger and Debt, report from IPES- Food
The food price crisis is entering a dangerous new phase – a debt crisis that is plunging millions more into hunger. IPES-Food’s new special report urges decision-makers to act on comprehensive debt relief and food system transformation, before it’s too late.
Although food prices have receded from 2022’s record highs, public finances in low-income countries are being buffeted by sky-high import costs for food, fertilizers, and energy, and rapidly-rising interest rates. 60% of low-income countries and 30% of middle-income countries are now considered at high risk of, or already in, debt distress; while some 21 countries are nearing catastrophic levels of both debt distress and food insecurity.
Our unsustainable food systems are a major driver of the debt crisis. Import dependencies, extractive financial flows, boom-bust commodity cycles, and climate-vulnerable food systems are combining to destabilize the finances of the world's poorest countries.
In turn, unsustainable debt leaves countries critically exposed to shocks and undermines their ability to make urgently-needed investments in climate-resilient food production and food security.
The expert panel calls for urgent action to:
Provide debt relief and development finance on a scale for COVID-19 recovery, climate action, resilient food systems, and the Sustainable Development Goals. Repair historical food system injustices and return resources to the Global South. Democratize financial and food systems governance to put the interests of the world’s poorest countries and marginalized populations first.
"The food crisis is still biting and now it’s sparking skyrocketing debt distress and spiralling hunger in dozens of low and middle-income countries. Rising debt bills are becoming unaffordable for many governments, just as they struggle to pay for food and fertilizer imports. Decades of progress in reducing hunger risks being undone". - Jennifer Clapp, IPES-Food expert economist
“Many African countries’ economies and food systems are on the brink of meltdown. We’re stuck importing increasingly unaffordable staple foods while climate change batters our harvests, and interest payments spiral out of control. Our governments are starved of cash to build the sustainable food systems we need to feed ourselves.” - Million Belay, IPES-Food expert economist
“Yes, the debts of poorer nations should be cancelled to allow them to feed their people – but this is not enough. It’s vital to break the vicious cycle of unsustainable food systems, hunger, and debt – by also investing in resilient food and farming, repairing historical injustices, and reforming decision-making on food and debt to put poor countries first.” - Lim Li Ching, co-chair of IPES-Food
Nov. 2022
UNDP: 50 of the poorest developing countries are in danger of defaulting on their debt.
More than 50 of the poorest developing countries are in danger of defaulting on their debt and becoming effectively bankrupt unless the rich world offers urgent assistance, the head of the UN Development Programme has warned.
Inflation, the energy crisis and rising interest rates are creating conditions where an increasing number of countries are in danger of default, with potentially disastrous impacts on their people, according to Achim Steiner, the UN’s global development chief.
“There are currently 54 countries on our list [of those likely to default] and if we have more shocks – interest rates go up further, borrowing becomes more expensive, energy prices, food prices – it becomes almost inevitable that we will see a number of these economies unable to pay,” he said. “And that creates a catastrophic scenario, with all the social and economic and political implications this carries with it.”
Speaking at the Cop27 UN climate summit, Steiner said any such default would create further problems for solving the climate crisis. “It certainly will not help climate action,” he said. Without measures to help them with debt, he warned, poor countries could not get to grips with the climate crisis.
“The issue of debt has now become such a big problem for so many developing economies that dealing with the debt crisis becomes a precondition for actually accelerating climate action,” he said. “We need to inject targeted liquidity into countries to be able to invest in energy transitions, and adaptation to the impacts of extreme weather.”
The climate crisis is further compounding the problem, he warned, as countries are facing increasing effects from extreme weather. Poor countries are not receiving the funding they were promised from the rich world, yet are facing a growing danger of storms, floods, droughts and heatwaves.
Steiner warned that some developing countries were in danger of giving up on the UN climate talks if developed country governments failed to fulfil a longstanding promise to poor nations of $100bn a year in assistance, to help them cut greenhouse gas emissions and adapt to the impacts of extreme weather.
One of the major issues at the Cop27 talks is loss and damage, referring to the most devastating impacts of extreme weather, which countries cannot protect themselves against.
Steiner said the issue was often misunderstood. “It’s building on something that in many of our countries is an established practice. When extraordinary floods take place, the Government, the taxpayer essentially steps in with support for the damage that has not been recoverable from insurance companies,” he said.
“We have an established practice that the common purse steps in where a catastrophic event happens. But when a Caribbean island has a third of its GDP wiped out in 12 hours through a hurricane, there’s nobody to turn to.”
That was why a loss and damage fund was needed, he said. “That’s where the injustice of climate change becomes so egregious in the view of many developing countries. Not having been even remotely a principal causal factor in the climate crisis, they are now paying an extraordinary price through the damage they suffer.”
Rich countries have the resources to end the debt crisis, which has deteriorated rapidly in part as a consequence of their own domestic policies. These policies have sent interest rates in developing economies skyrocketing and investors fleeing. This is happening while developing economies have large financing shortfalls for fighting climate change. The 54 most debt-vulnerable countries include 28 of the world’s top-50 most climate vulnerable nations.
Spiralling debt in low and middle-income countries has compromised their chances of sustainable development, the head of UN trade facilitation agency UNCTAD has warned.
Rebeca Grynspan said that between 70 and 85 per cent of the debt that emerging and low-income countries are responsible for, is in a foreign currency. This has left them highly vulnerable to the kind of large currency shocks that hit public spending – precisely at a time when populations need financial support from their governments.
Ms. Grynspan – speaking at the 13th UNCTAD Debt Management Conference - explained that so far this year, at least 88 countries have seen their currencies depreciate against the powerful US dollar, which is still the reserve currency of choice for many in times of global economic stress. And in 31 of these countries, their currencies have dropped by more than 10 per cent.
This has had a hugely negative impact for many African nations, where the UNCTAD chief noted that currency depreciations have increased the cost of debt repayments “by the equivalent of public health spending in the continent”.
With interest rates rising sharply, the debt crisis is putting enormous strain on public finances, especially in developing countries that need to invest in education, health care, their economies and adapting to climate change.
“Debt cannot and must not become an obstacle for achieving the 2030 Agenda and the climate transition the world desperately needs", she argued.
Oct. 2022
Lower income country borrowing costs rise at three times rate of the US. (Debt Justice)
New analysis by Debt Justice finds that average interest rates on new borrowing by lower income countries have increased by 5.7 percentage points this year, almost three times the rate of increase in US government borrowing costs. Furthermore, for two-thirds of lower income countries where there is data, interest rates are so high they are probably unable to take out new loans from external private lenders.
The worsening of financial conditions, alongside the climate emergency, is intensifying debt crises in many lower income countries. The number of countries defaulting on or restructuring debt could rapidly increase. Action to tackle debt problems will be discussed at the IMF and World Bank Annual Meetings in Washington DC from 10-16 October.
Heidi Chow, Executive Director of Debt Justice, said:
“Many countries were already cutting essential spending to cope with the debt crisis, before rising interest rates made an alarming situation even worse. Countries like Pakistan are also facing colossal costs from widespread devastation caused by the climate emergency. We urgently need mechanisms to quickly cancel debts for countries in need, especially high interest loans from private lenders.”
Bhumika Muchhala, Senior Advisor on Global Economic Governance, Third World Network, said:
“While the US Federal Reserve has repeatedly raised its interest rate in response to the global inflation spike, there is little to no regard of the adverse spillovers imposed on developing countries across the world. These findings are an urgent call for a multilateral debt restructuring mechanism where all creditors – private, government and multilateral – participate, as well as a rethink of exchange rate liberalization and domestic monetary tightening as a strategy to secure market confidence in developing countries.”
Of the 27 lower income governments with public information available on their foreign currency bonds, Debt Justice finds that nine have yields over 20%: El Salvador, Ethiopia, Ghana, Maldives, Pakistan, Sri Lanka, Tunisia, Ukraine and Zambia. A further ten have yields between 10% and 20%: Angola, Cameroon, Egypt, Honduras, Kenya, Mongolia, Nigeria, Papua New Guinea, Rwanda and Tajikistan.
The yield is a measure of what the interest rate would be on new loans from the private sector, though yields of over 10% suggest borrowing will not be possible.
As well as the rise in borrowing costs, the analysis finds that for the 27 countries covered in the study, the dollar has increased in value by an average of 14% compared to local currencies. Because external debts tend to be owed in foreign currencies, especially the dollar, this immediately increases the relative size of debt payments in local currencies.
Tackling the debt, climate and nature crises together. (International Institute for Environment & Development)
In the wake of the COVID-19 pandemic, urgent debt relief is needed. This is an opportunity to change how debt relief is addressed and delivered. IIED is working to have creditors and receiving countries take up climate and nature programme swaps – a system that makes it possible to tackle the debt, climate change and nature emergencies together, in order to reduce poverty and better ensure an inclusive and sustainable post-COVID recovery.
* Debt Conversion for Humanitarian and Climate Impact - ICRC, International Red Cross and Red Crescent Movement
People affected by armed conflict and other violence continue to face devastating humanitarian consequences, with the climate crisis compounding risks and heightening vulnerabilities. Restricted aid budgets, and the increase in climate-related humanitarian emergencies, call for new approaches that allow local leadership to build affected people’s resilience and increase their capacity to anticipate and respond to crises.
Funding humanitarian aid through bilateral debt cancellation is nothing new. However, conventional arrangements tend to be cumbersome and time-consuming, often with long structuring, negotiation and execution periods.
The International Committee of the Red Cross (ICRC), together with partners from the International Red Cross and Red Crescent Movement, has developed a financing model known as the Rapid Disbursing Debt Conversion Mechanism (RDDCM, or the Mechanism). With a streamlined transaction structure, this model aims to address these problems by facilitating the rapid release of local currency in the affected country, in order to mobilize resources for National Red Cross and Red Crescent Societies and provide critical assistance to affected populations.
Thanks to the Standby procedure to pre-arrange the activation of the RDDCM in anticipation of a humanitarian crisis or emergency, the Mechanism offers an innovative alternative for channelling climate and humanitarian funding to a locally led response, including in conflict settings that are typically deprived of other forms of climate finance.

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