World Bank-IMF Spring Meetings provide little relief amid debt, tariff & aid concerns of Global South

Over this century, low- and middle-income countries (LMIC) have seen their external public debt rise from $1.1 trillion in 2000 to $3.4 trillion in 2023.

Meanwhile, the recent aid cuts announced by the United States, United Kingdom, France, Germany and other Western countries will make it increasingly difficult for the Global South to balance rising debt servicing costs with crucial developmental needs. As much as 23 per cent of the fund flow before cuts were announced could be frozen by 2027, according to analysis by ONE, an international data research organisation.

To add to this, Donald Trump’s protectionist tariffs will add another layer of concern, as many countries depend on export earnings for economic growth and for obtaining crucial foreign currencies to finance their external debt repayments.

In light of such economic challenges, any hope that the World Bank-IMF Spring meetings — held between April 21-26 2025 — will provide respite, was met with disappointment.

World Bank-IMF Spring meetings 2025: Uncertainty and marginal progress

Given the recent spate of aid cuts for developing countries and rising tariffs, IMF downgraded its global growth forecast from 3.3 per cent (that was announced in January 2025) to 2.8 per cent for 2025.

IMF also projected that global public debt will increase by 2.8 per cent, reaching 95.1 per cent of global gross domestic product (GDP) in 2025. This is projected to reach 100 per cent of global GDP by 2030. 

IMF’s Managing Director Kristalina Georgieva acknowledged the uncertainty around the global economy, while hoping that trade negotiations can provide some relief on the tariffs question. Indermit Gill, chief economist at the World Bank, highlighted how trade uncertainties are compounding rising debt and sluggish growth.

The Global Sovereign Debt Roundtable (GSDR) — launched in 2022 to help secure debt treatment for countries in default — met on April 23, 2025 at the Spring meetings. With the participation of creditors, borrowing countries, the World Bank and IMF, GSDR discussed how to ensure proactive debt restructuring, support countries that face high debt servicing challenges and prevent a future unsustainable build-up of public debt.

On debt restructuring, the two institutions released a ‘playbook’ to help countries that are considering debt restructuring with key steps, concepts and processes. Other areas of concern were enhanced transparency and information sharing, post-restructuring credit rating upgrades and suspension of debt service payments for countries undergoing a restructuring.

On supporting countries with high debt servicing costs, the discussions focused on structural reforms to boost growth and job creation, mobilisation of domestic resources, financial support from official creditors and using risk-sharing instruments alongside debt-for-development swaps and debt buybacks.

IMF further spoke about reviewing its debt sustainability framework for low-income countries as well as its lending programmes, with the view to address macroeconomic imbalances and promote growth.

The Spring meetings witnessed tough exchanges on the issue of climate change, as US Treasury Secretary Scott Bessent criticised the IMF and the World Bank’s climate-related initiatives and asked them to refocus on their core economic mandates — while also claiming that the institutions should be technology-neutral and invest in gas and other fossil fuel-based energy production.

But this saw pushback from Georgieva, who defended the inclusion of climate initiatives in their mandate, given the macroeconomic implications for vulnerable countries. She emphasised that the IMF would continue working on balance-of-payment issues while also supporting countries affected by the climate crisis.

The World Bank’s Ajay Banga, however, spoke about reviewing the financial institution's energy policy, including long-held prohibitions on nuclear energy and gas.

Net negative finance flows

Not only has the external debt stock risen for LMICs, the overall flow of international debt finance has shifted from a net inflow since the 2010s to a net outflow in recent years. Since 2022, more money has exited LMICs via external debt repayments (or debt servicing) than has entered via disbursements from foreign creditors, with negative net transfers (more outflows than inflows) of $37.59 billion in 2022 and $952 million in 2023.

This becomes a serious concern when the developmental needs of the Global South are sidelined over high debt servicing costs. Some 3.3 billion people live in countries that spend more on public debt interest payments than on either education or health, according to UNCTAD. IMF figures show that 35 countries are either in, or at high risk of, debt distress — referring to the inability, or potential risk, of countries not being able to meet their debt obligations. 

State of public finance in developing countries

The developing world has, for long, faced challenges in accessing affordable lending. The borrowing rates for developing countries remain much higher than developed ones due to perceived risks. LMICs face borrowing costs that are 2-4 times higher than the Unites States, according to estimates.

Since 2020, the COVID-19 pandemic and the Russia-Ukraine war have pushed up inflation, making borrowing even more expensive. As a result, external public debt servicing costs for LMICs have sky-rocketed from $251.43 billion in 2015 to $367.97 billion in 2023.

Moreover, in recent years, private creditors have been stepping back as a creditor base for LMICs. Bondholders, for instance, who held 45 per cent of the external public debt stock of LMICs in 2023, have been withdrawing billions more in debt repayments than they have been disbursing to LMICs. Since 2020, net transfers from bondholders to LMICs (excluding China) have been negative, reaching $64.52 billion in 2022 and $13.35 billion in 2023.

With high costs of new borrowing, burdensome interest payments that cut into essential public spending, shrinking creditor base, limited aid and reduced export earnings owing to the impacts of US’s tariffs, the Global South will find it increasingly difficult to access the capital it requires for economic growth.

The 2025 Spring meetings of the two Bretton Woods institutions only confirmed the precarity of public finance flows in the Global South, while offering little respite by way of tangible and progressive steps towards debt relief and fiscal support.

The new US administration has instigated huge economic uncertainties through its America First policies, and it remains to be seen if the rest of the world can steady the ship and help countries progress on their developmental goals.