UNITED NATIONS, February 25 (WSH) – According to a new policy brief by the United Nations Development Programme (UNDP), the debt crisis plaguing developing countries has escalated to levels not seen in over two decades, leading to severe development trade-offs.
Released ahead of the G20 Ministers of Finance and Central Bank Governors meeting in Cape Town, the UNDP brief highlights that debt vulnerability indicators remain alarmingly high and continue to deteriorate. Debt servicing is consuming an increasingly large share of national revenue in developing countries, particularly in Least Developed Countries (LDCs).
Alarming Debt Servicing Trends
The UNDP report reveals that 56 developing countries are currently spending over 10 percent of government revenue on interest payments—nearly double the number from a decade ago. Among these, 17 countries allocate more than 20 percent of revenue to interest payments, a threshold strongly associated with heightened default risk.
UNDP Calls for Immediate Action
“The debt-development trade-offs threaten to erase a decade of development progress for many of the world’s poorest nations,” warned Achim Steiner, UNDP Administrator. “The international community must act decisively and provide tangible financial lifelines without delay. A new debt relief initiative is both financially and politically imperative.”
Staggering Debt Burdens in Poorest Nations
The UNDP policy brief estimates that the total external public debt for the 31 poorest countries currently in or at high risk of debt distress stands at 205 billion U.S. dollars—less than one-third of the 2021 IMF Special Drawing Rights allocation, which predominantly benefited wealthy countries, and less than one year of total official development assistance (ODA) from the OECD’s Development Assistance Committee.
Rising Risks of Long-Term Solvency Crises
The UNDP analysis underscores that without improved access to effective debt relief, many developing countries face long-term solvency crises. In 2023, developing economies’ total external debt servicing reached a record 1.4 trillion dollars. The poorest countries have borne the brunt of this crisis, with debt servicing costs tripling and interest payments quadrupling over the past decade, reaching an estimated 36 billion dollars.
Key Reforms Urged Ahead of FfD4 Conference
Ahead of the International Conference on Financing for Development (FfD4) in Seville, Spain, this June, the **United Nations Development Programme is urging policymakers to prioritize three critical debt policy reforms:
1. A more effective and orderly debt restructuring framework – Ensuring all developing countries can access relief when needed.
2. A systemic debt relief initiative – Supporting the poorest countries in breaking the cycle of underinvestment in development.
3. Reducing excessively high borrowing costs – Enabling developing countries to invest in long-term growth.
G20’s Role in Shaping Sustainable Solutions
“Forums like the G20 play a crucial role in shaping long-term financing solutions that foster sustainable growth opportunities,” emphasized Steiner. “Critical priorities like debt stress are reaching a tipping point, demanding bold and immediate action to create a pathway toward growth and stability for those most in need.”
