The world is in debt. From developed economies to developing ones, public debt has reached a historic level—and along with it, the burden of servicing these loans. In 2024, the US, for the first time, spent more on debt servicing than on the military. The UK is in a situation popularly termed a “debt death spiral”. At the World Economic Forum held in January in Davos, Switzerland, Zimbabwean Finance Minister Mthuli Ncube spoke of his country’s debt crisis: “We’ve even got a tax now on fast food. If you’re buying tacos or pizza or something, you pay an extra fee.” He was referring to the extreme measures the government is taking to service its high debt levels.
Gita Gopinath, deputy chief of the International Monetary Fund (IMF), further warned at the annual gathering in Davos, “We need an absolute pivot because this is not business as usual. It is worse than you think.”
On March 17, Rebeca Grynspan, secretary-general of UN Trade and Development (UNCTAD), opened the 14th session of the International Debt Management Conference in Geneva with a stark sense of urgency about the unfolding global debt crisis: “The Romans had a god named Janus—deity of thresholds, beginnings, and transitions—famously depicted with two faces, one looking back, the other forward. Debt management demands that same duality. Like that ancient god, we too must look in two directions at once: backward at the debts we’ve accumulated and forward to the futures they will shape.”
By early 2025, global public debt has reached a historic US $100 trillion, according to IMF. Currently, countries are struggling to pay the interest on this immense debt. Developing and poor nations find it particularly difficult to service their debt. For developing countries, external debt reached $11.4 trillion in 2023, equivalent to 99 per cent of their export earnings.
To service their debt, developing countries are diverting budgets away from crucial development priorities like health and education. To illustrate the scale of this diversion, estimates show that countries with a combined population of 3.3 billion are spending more on debt servicing than on health or education—despite being in desperate need of increased investment in human development sectors.
UNCTAD states that “interest payments outweigh climate investments in almost all developing countries, limiting their ability to respond to global challenges”. Grynspan further warns, “This forces countries to choose to default on their development rather than default on their debt.” The UN Development Programme (UNDP) recently found that, in 2022, some 25 developing countries spent over 20 per cent of their government revenues on servicing external debt. For low-income countries, spending on interest payments for debt was 2.3 times higher than expenditure on social assistance.
After nearly a decade, UNCTAD’s Fourth International Conference on Financing for Development (FfD4) will be held in Seville, Spain, from June 30 to July 3. The previous FfD3 conference, held in Addis Ababa, focused on mobilising funds for Sustainable Development Goals (SDGs). Despite the commitments made at FfD3, the financing gap for SDGs and climate action in developing countries is now estimated at $4 trillion per year—double the level in 2015.
FfD4 is taking place in a vastly different geopolitical context—one shaped by the pandemic, the climate emergency, and most critically, the debt crisis. The global crisis is set to dominate discussions, with debt restructuring or even a debt relief deal topping the agenda, as debt burdens severely hinder countries’ ability to fund the SDGs and climate action.
While there are currently no signs of a global debt waiver deal, calls for one are gaining traction. This is because if debt is restructured or waived, fresh funds could flow into these urgent priorities. This would help tackle two major challenges: reducing poverty and addressing the climate emergency, which, in turn, exacerbates poverty.