In the wake of the COVID-19 pandemic, developing countries’ external sovereign debt – funds borrowed in foreign currency – increased by 15.7per cent to $11.4 trillion by the end of 2022. The mounting debt levels are further complicated by the diversity of lenders and financial instruments.
The rising debt costs are draining vital public resources needed for development. About 3.3 billion people – almost half of humanity – now live in countries that spend more money paying interest on their debts than on education or health. The UN’s “A World of Debt Dashboard” provides data and in-depth insight on key public debt and development spending indicators for 188 countries.“This situation is clearly unsustainable.
“A development-centred approach to debt is needed,” Ms. Nesvetailova says, highlighting overlooked factors contributing to unsustainable sovereign debt, such as climate change. “We’re urging new creative thinking in all stages of the debt cycle, as well as new approaches to bridge the persistent divide between statutory and contractual solutions,” says Penelope Hawkins, head of UNCTAD’s debt and development finance branch.