According to the United Nations (UN) assessment report, “A World of Debt 2024: A Growing Burden to Global Prosperity,” global public debt, encompassing both domestic and external government borrowings, reached an unprecedented USD 97 trillion in 2023. This marks an increase of USD 5.6 trillion compared to 2022. The report, prepared by the Global Crisis Response Group technical team at the UN Trade and Development (UNCTAD) under the leadership of Secretary-General Rebeca Grynspan, calls for urgent reforms to safeguard future prosperity for people and the planet.
Key Highlights:
- Debt Distribution:
- Global Debt: USD 97 trillion in 2023.
- Developing Countries’ Share: 30% of the total global debt, with their debt growth rate doubling that of developed nations.
Impact on Africa:
- Debt-to-GDP Ratios:
- The number of African countries with debt-to-Gross Domestic Product (GDP) ratios above 60% rose from 6 in 2013 to 27 in 2023.
- Per Capita Spending: The average African now spends more on interest payments (USD 70) than on education (USD 60) and health (USD 39).
Rising Interest Costs:
- Interest Payments:
- Developing nations paid USD 847 billion in net interest in 2023, a 26% increase from 2021.
- These countries borrow internationally at rates significantly higher than developed nations, limiting their budgets. Rates are 2 to 4 times higher than the United States (US) and 6 to 12 times higher than Germany.
- Despite limited repayment capacity, developing countries face a disproportionate burden of debt service, with interest payments rising by 21% in 2023.
- Government Revenue Allocation:
- Around half of developing countries allocate at least 8% of government revenues to debt servicing, a percentage that has doubled over the past decade.
- In 2023, 54 developing nations, particularly in Africa, dedicated a minimum of 10% of government funds to debt interest payments.
Climate Change and Debt:
- Spending Comparison:
- Developing nations are allocating 2.4% of their GDP to interest payments, surpassing the 2.1% spent on climate initiatives.
- High debt levels hinder efforts to combat climate change effectively, emphasizing the urgency to limit global warming to 1.5°C.
Human Impact:
- Essential Services vs. Debt:
- 3.3 billion people live in countries where interest payments exceed spending on education or health.
- In Africa, 769 million people, nearly two-thirds of the population, live in nations where debt servicing overshadows essential investments in education and health.
Causes and Contributing Factors:
- Aid and Loans:
- Declining development aid and the rise of concessional loans have exacerbated the debt crisis for developing nations.
- The share of loans in aid increased from 28% in 2012 to 34% in 2022, while support for debt relief significantly decreased from USD 4.1 billion in 2012 to USD 300 million in 2022.
Revamping Global Finance for Sustainable Development:
The report proposes a plan to revamp the global financial system and enhance the UN’s Sustainable Development Goals (SDG) stimulus package to tackle the current debt crisis.
About United Nations Trade and Development (UNCTAD):
- History and Role:
- Established in 1964, UNCTAD is a permanent intergovernmental body focused on trade and development.
- In April 2024, it was rebranded as “UN Trade and Development” in commemoration of its 60th anniversary.
- Headquarters: Geneva, Switzerland
Conclusion:
The UN report highlights the growing burden of global public debt, especially on developing nations, and the urgent need for international reforms to address this crisis. The significant increase in interest payments and the prioritization of debt servicing over essential services like education and health underscore the critical challenges faced by developing countries. The proposed reforms aim to create a more sustainable financial system to support global prosperity and achieve the UN’s Sustainable Development Goals.
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