A NEW report released by the UN on Wednesday reveals that nearly 3.3 billion people, nearly half of the global population, live in countries where debt payments surpass spending on education and health. UN Secretary-General Antonio Guterres, speaking at the report’s launch, highlighted the alarming situation, noting that although the debt crisis primarily affects poor developing nations, it should not be dismissed as lacking systemic risk. He described it as a ‘systemic failure’ and emphasised that billions of people are already suffering, despite financial markets appearing relatively unaffected. Guterres stressed that the levels of public debt are reaching staggering and surging proportions.
The report indicates that global public debt reached a record $92 trillion in 2022, with developing countries shouldering a disproportionate burden. The number of nations facing high debt levels has risen dramatically from 22 in 2011 to 59 in 2022. Guterres drew attention to the fact that a growing portion of debt is held by private creditors who impose exorbitant interest rates on developing countries. He cited the example of African countries, which pay four times more in interest compared to the United States and eight times more than the wealthiest European nations.
The consequences of the debt crisis are severe, leaving governments with insufficient funds to invest in achieving the UN’s development goals for 2030. These goals include eradicating extreme poverty, ensuring quality primary and secondary education for all children, and transitioning to renewable energy. The report attributes the colossal levels of public debt to two factors: the increasing financial requirements resulting from crises like the Covid-19 pandemic, rising living costs, and climate change, and the inadequacy and high cost of financing available to developing countries within the global financial architecture.
According to the IMF, 36 countries are currently in or at high risk of debt distress, while another 16 are burdened by unsustainable interest rates imposed by private creditors. In total, 52 countries, representing nearly 40 percent of the developing world, are facing serious debt problems. The UN report highlights the exponential growth of public debt, which has more than quintupled since 2000, significantly outpacing global GDP growth over the same period.
Rebeca Grynspan, the UN trade chief, underlined the urgency of the situation, citing the rapid and substantial growth of public debt. She noted that it has increased more than fivefold since 2000, far surpassing the tripled growth rate of global GDP. Regionally, government debt has surged by nearly four times in Asia and the Pacific between 2010 and 2022, three times in Africa, 2.5 times in Europe and Central Asia, and 1.6 times in Latin America and the Caribbean, according to Armida Alisjahbana, Executive Secretary of the UN Economic and Social Commission for Asia and the Pacific.
The UN report proposes a roadmap to global financial stability, stressing the need for significant reforms to the global financial architecture, particularly within the IMF and World Bank. It also advocates for a new debt mechanism that includes payment suspensions, longer lending terms, and lower interest rates, especially for vulnerable middle-income countries. Grynspan emphasized the necessity of a faster debt restructuring mechanism, as the current process can take up to 2.5 years.
Guterres called for action on debt relief and other necessary financial reforms at the upcoming summit of the world’s 20 wealthiest nations in India on September 9-10. He emphasized that this gathering presents an opportunity to address the critical issue of debt and its devastating impact on nations and their populations.
