Global public debt reached a record $92 trillion in 2022 as governments borrowed to address catastrophes like the COVID-19 pandemic, with developing nations bearing the brunt of the load most severely, according to a UN report.
According to the Wednesday report, which was released in advance of a G20 finance ministers and central bank governors’ meeting July 14–18, domestic and external global public debt has increased more than five times in the last two decades, outpacing the rate of economic growth, with gross domestic product only tripling since 2002.
“Markets may not seem to be suffering yet. But people are,” said Antonio Guterres, secretary-general of the United Nations. “Some of the poorest countries in the world are being forced into a choice between servicing their debt or serving their people.”
Nearly 30% of the world’s public debt is owed by developing nations, of which China, India, and Brazil account for 70%. 59 developing nations have debt-to-GDP ratios that are more than 60%, which is a cutoff point for excessive debt levels.
“Debt has been translating into a substantial burden for developing countries due to limited access to financing, rising borrowing costs, currency devaluations, and sluggish growth,” the UN study noted.
The UN pointed to the fact that net interest debt payments for 50 emerging economies globally exceeded 10% of revenues as evidence that the international financial architecture made it both difficult and expensive for developing nations to acquire funding.
The survey showed that 3.3 billion people live in nations that spend more on debt interest payments than on health or education. “In Africa, the amount spent on interest payments is higher than spending on either education or health,” it said.
“Countries must make the impossible decision between serving their people and paying off their debts.”
A total of 62% of the external public debt of emerging nations is owed to private creditors, including bonds and banks.
The percentage of creditors in Africa increased from 30% in 2010 to 44% in 2021, while the percentage of private creditors holding foreign government debt in Latin America is the highest of any region at 74%.
The International Monetary Fund (IMF) surcharges, commissions assessed to borrowers who heavily utilize its credit lines, were temporarily suspended, according to the UN, and countries in debt distress were given greater access to financing.
The authors said that a debt workout mechanism was also required “to address the slow progress of the G20 Common Framework,” but did not go into greater detail as to how that mechanism should function.
The debt reduction plan, which aspires to include non-Paris Club members like China, was accepted by the Group of 20 major countries and official creditors in October 2020.
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