United Nations Global Crisis Response Group Briefs

Public debt can be a powerful tool for development, enabling governments to finance critical expenditures and invest in a better future for their people. However, when public debt grows excessively or rapidly, it becomes a heavy burden, particularly for developing countries. This report highlights the alarming surge in global public debt, driven by cascading crises in recent years. The growing debt burden disproportionately impacts developing countries, as servicing it diverts essential resources away from their development aspirations. Recent events have worsened this challenge. The rise in global interest rates since 2022 further strained public budgets in developing countries. High interest payments are outpacing the growth in essential public expenditures such as health, education, and climate action. In the developing world, home to 3.3 billion people, one out of every three countries spends more on interest payments than on these critical areas for human development.

“A World of Debt” aims to provide an accessible and comprehensive platform to understand the critical issues of public debt in developing countries. Public debt can be vital for development. Governments use it to finance their expenditures, to protect and invest in their people, and to pave their way to a better future. However, it can also be a heavy burden, when public debt grows too much or too fast. This is what is happening today across the developing world. Public debt has reached colossal levels, largely due to two factors; One - financing needs soared with countries’ efforts to fend off the impact of cascading crises on development. These include the COVID-19 pandemic, the cost-of-living crisis, and climate change; Two - an inequal international financial architecture makes developing countries’ access to financing inadequate and expensive. The weight of debt drags down development. 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. These factors compromise their ability to react to emergencies, tackle climate change and invest in their people and their future. Countries are facing the impossible choice of servicing their debt or serving their people. Today, 3.3 billion people live in countries that spend more on interest payments than on education or health. A world of debt disrupts prosperity for people and the planet. This must change.

A war is always a human tragedy, and the war in Ukraine is no exception. The ripple effects of the conflict are extending human suffering far beyond its borders. The war, in all its dimensions, has exacerbated a global cost-of-living crisis unseen in at least a generation, compromising lives, livelihoods, and our aspirations for a better world by 2030. The largest cost-of-living crisis of the twenty-first century has come when people and countries have a limited capacity to cope. The war in Ukraine has trapped the people of the world between a rock and a hard place. The rock is the severe price shocks in food, energy and fertilizer markets due to the war, given the centrality of both the Russian Federation and Ukraine in these markets. The hard place is the extremely fragile context in which this crisis arrived; a world facing the cascading crises of the COVID-19 pandemic and climate change. A shock of this magnitude would have been a significant challenge no matter the timing; now, it is of historic, century-defining proportions.