A world of debt- UNCTAD Report 2024

A world

of debt

Report 2024

A growing burden to

global prosperity

Why it matters?

Public debt can be vital for development. Governments use it to finance their expenditures, to protect and invest in their people, and to pave their way to a better future. However, it can also be a heavy burden, when public debt grows too much or too fast. 

This is what is happening today across the developing world. 

Global public debt has reached a record high of US$ 97 trillion in 2023.Although public debt in developing countries reached less than one third of the total – US$ 29 trillion – since 2010 it has grown twice as fast as in developed economies.

There is a stark contrast among developing regions. Asia and Oceania hold 27 % of global public debt, followed by Latin America and the Caribbean (5%), and Africa (2%). The burden of this debt varies significantly, with countries' ability to repay it exacerbated by inequality embedded in the international financial architecture.

Developing countries are now facing a growing and high cost of external debt. Debt service on external public debt reached US$ 365 billion in 2022, equivalent to 6.3% of export revenues. For comparison, the 1953 London Agreement on Germany’s war debt limited the amount of export revenues that could be spent on external debt servicing (public and private) to 5% to avoid undermining the recovery.

This dynamic is largely a result of high borrowing costs which increase the resources needed to pay creditors, making it difficult for developing countries to finance investments. Developing regions borrow at rates that are 2 to 4 times higher than those of the United States and 6 to 12 times higher than those of Germany.

Moreover, developing countries experienced a net resource outflow when they could least afford it. In 2022, developing countries paid US$ 49 billion more to their external creditors than they received in fresh disbursements, resulting in a negative net resource transfer.

The impact of these trends on development is a major concern, as people pay the price.

The increase in interest rates by central banks worldwide since 2022 is having a direct impact on public budgets. Developing countries’ net interest payments on public debt reached US$ 847 billion in 2023, a 26% increase compared to 2021. In the same vein, in 2023 a record 54 developing countries, equivalent to 38% of the total, allocated 10% or more of government revenues to interest payments.

Developing countries’ interest payments are not only growing fast, but they are outpacing growth in critical public expenditures such as health and education. As a consequence, interest payments are constraining spending across developing countries. For example, during the initial years of the COVID-19 pandemic, Africa and Asia and Oceania (excluding China) spent more on interest payments than on health.

Overall, a total of 3.3 billion people live in countries that spend more on interest payments than on either education or health. Moreover, in emerging and developing countries interest payments outweigh climate investments, thus slowing down efforts towards climate change adaptation and mitigation.

Developing countries must not be forced to choose between servicing their debt or serving their people.

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Developing countries must not be forced to choose between servicing their debt or serving their people. Instead, the international financial architecture must evolve to ensure a prosperous future for both people and the planet. 

To address these challenges and achieve sustainable development, the United Nations outlines a clear way forward in the SDG Stimulus package and the Summit of the Future’s policy brief on the Reforms to the International Financial Architecture. UNCTAD _____________________________________________

World Population 

⃝•  According to UN estimates, the world population passed the 8 billion mark on 15 November (2023). Over the past 25 years, the number of people on the planet has increased by one third, or 2.1 billion. Humanity is expected to grow by another fifth to just under 10 billion around 2050.

In the last 25 years, almost all the growth happened in developing economies, mainly in Asia and Oceania (1.2 billion more people) and Africa (an additional 700 million individuals). This trend is expected to continue, with half of the projected increase in world population between now and 2050 expected to occur in a few larger countries in Africa and Asia.

As the population has grown, the share of people living in developing countries has increased from 66% in 1950 to 83% now and should reach 86% by 2050. This underlines the importance of tackling the challenges that affect these nations, such as hunger, access to clean water and sanitation and health services, and getting people connected to affordable sources of sustainable electricity and the Internet.  

An estimated 828 million people go to bed hungry every night, the vast majority in developing countries. These countries, especially in Africa, are bearing the heaviest brunt of socioeconomic inequalities and poor living conditions, according to UNCTAD’s Inclusive Growth Index. In more than three fourths of African countries, half of the population has no access to clean and safely managed water. And in some developing nations, just one in 100 people have a broadband Internet connection. 

Faster population growth in developing countries makes addressing the climate emergency all the more urgent. Developing countries already struggle to find ways to meet increasing food and energy needs and will need support to meet the future demands of a growing population without excessive use of natural resources, pollution and waste generation. 

Countries with high economic performance generate twice the amount of waste per capita compared to developing countries. This highlights the need for both developed and developing countries to “decouple” prosperity from CO2 emissions while ensuring a just low-carbon transition. Developed countries should redouble their efforts towards a low-emissions future, while providing developing countries with the technologies, skills and financial support necessary to move their economies towards industries and sectors that are less polluting. This must be a priority at COP27 climate summit.

While fast population growth in developing countries presents many challenges, it can also be a source of new economic opportunities – for instance in Africa where the size of the working age population is increasing relative to younger and older generations. But if the world is unable to break the link between pollution and affluence, the challenges will likely overshadow the opportunities for the entire planet.