According to the United Nations (UN) assessment report, “A World of Debt 2024: A Growing Burden to Global Prosperity,” the global public debt (both domestic and external borrowing by governments) has reached USD 97 trillion in 2023, an increase of USD 5.6 trillion compared to 2022.
- Developing countries account for 30% of the total global debt, with their debt growth rate doubling that of developed nations.
- The report was prepared by the Global Crisis Response Group technical team at the UN Trade and Development (UNCTAD), under the leadership of Secretary-General Rebeca Grynspan.
Note: The global debt burden’s alarming surge demands for urgent reforms to safeguard future prosperity for people and the planet.
Impact on Africa:
i.African economies have been severely impacted, with the number of countries having debt-to-Gross Domestic Product (GDP) ratios above 60% rising from 6 to 27 between 2013 and 2023.
ii.The average African now spends more on interest payments (USD 70) than on education (USD 60) and health (USD 39) per capita.
Rising Interest Costs:
i.Developing nations paid USD 847 billion in net interest in 2023, a 26% increase from 2021.
ii.These countries internationally borrowed at rates significantly higher than developed nations, limiting their budgets.
- The rates are 2 to 4 times higher than the United States (US) and 6 to 12 times higher than Germany.
Note: Developing countries, despite their limited capacity to repay, bear a disproportionate burden of debt service, with interest payments rising by 21% in 2023.
Impact of Rising Interest Costs:
i.Currently, around half of developing countries allocate at least 8% of government revenues to debt servicing. This percentage has doubled over the past decade.
ii.In 2023, a historic milestone was reached, with 54 developing nations, particularly in Africa (almost half), dedicating a minimum of 10% of government funds to debt interest payments.
Climate Change and Debt:
i.Developing nations are allocating 2.4% of their GDP on interest payments, surpassing the 2.1% spent on climate initiatives.
ii.Debt hinders their efforts to combat climate change effectively, requiring urgency to limit global warming to 1.5°C.
Human Impact:
i.3.3 billion people live in countries where interest payments exceed education or health spending.
ii.769 million Africans, nearly two-thirds of the population live in nations where debt servicing overshadows essential investments in education and health.
Causes and Contributing Factors:
i.Declining development aid, coupled with the rise of concessional loans, increases the debt crisis for developing nations.
ii.Loans’ share in aid has increased from 28% in 2012 to 34% in 2022, while support for debt relief has reduced significantly 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):
i.It is a permanent intergovernmental body established in 1964 as the UN Conference on Trade and Development (UNCTAD).
ii.It is the UN’s leading institution dealing with trade and development. In April 2024, it was rebranded as “UN Trade and Development”, commemorating its 60th anniversary.
Headquarters– Geneva, Switzerland
