GENEVA (AN) — Developing countries owed nearly a third of the record US$97 trillion in global public debt in 2023, all but ensuring their inability to provide adequate health care, schools and climate programs.
The amount owed rose by US$5.6 trillion, or 6%, from 2022, "driven by cascading crises as well as the sluggish and uneven performance of the global economy," U.N. Trade and Development reported.
The agency formerly known as UNCTAD emphasized that the US$29 trillion in public debt owed by developing countries in 2023 – 30% of the global total – represented a substantial increase from the 16% share in 2010, and reflects the rapid growth of public debt in developing countries.
One out of every three developing countries spends more on interest payments than on critical areas for human development such as health, education and climate action, according to the report.
"The contrast among developing regions is stark. Over three-quarters of this debt is owed by countries in Asia and Oceania, while Latin America and the Caribbean accounts for 17% and Africa for just 7%," it found.
"The burden of this debt varies significantly with countries’ ability to repay it and is exacerbated by the inequality embedded in the international financial architecture: Those least able to afford it end up paying the most."
The jump in borrowing costs pushed interest on public debt to US$847 billion lst year, up 26% from two years earlier.
'More vulnerable' to shocks and instability
The report calls for overhauling the so-called Bretton Woods global financial system that emerged in post-World War II mainly to rebuild Europe. Without such change, it says, it will be all but impossible to spread prosperity among the 3.3 billion people living in the developing world.
"Developing countries are grappling with an international financial architecture, whose entrenched asymmetries exacerbate the impact of cascading crises on sustainable development," the report says.
"This system intensifies their debt burden by limiting access to affordable development finance and pushing them to borrow from more volatile and expensive external sources," it says. "The limited size of domestic financial markets and higher levels of external public debt make them more vulnerable to external shocks and financial instability."
The United States' public debt, US$33.4 trillion, was the largest, followed by China's US$14.7 trillion and Japan's US$10.6 trillion. Along with China, the largest debtors in developing regions were India, Brazil, Mexico and Egypt.
The report recommends:
- Making the system more inclusive by improving the real and effective participation of developing countries in the governance of the international financial architecture.
- Tackling the high cost of debt and rising risk of debt distress and create an effective debt workout mechanism to address the slow progress of the Group of 20 Common Framework for Debt Treatment due to limited country eligibility, creditor coordination challenges and the lack of automatic debt service suspension clauses to participating countries.
- Providing greater liquidity in times of crisis, expanding contingency finance so that countries are not forced into debt as a last resort, including through the strengthened use of Special Drawing Rights, a temporary suspension of International Monetary Fund surcharges, and increased quota-access windows to IMF emergency financing.
- More and better finance, massively scaling up affordable long-term
financing. The transformation and expansion of multilateral development banks to support long term sustainable development and scaling up private resources. More concessional finance; fulfilling aid and climate finance commitments.
