Debt crisis: 99 developing nations suffocate under $384bn interest burden – UNCTAD

Orisemeke Benjamin

Financing critical infrastructure and human capital development is becoming increasingly difficult for much of the global south, as soaring debt-servicing costs systematically crush public finances.

A new report by the United Nations Trade and Development (UNCTAD) has revealed a stark imbalance in the international financial system, showing that while developing nations continue to attract external finance, it remains highly volatile, insufficient, and significantly more expensive than that paid by wealthy economies.

According to the report, between 2018 and 2024, at least 99 developing countries—home to an estimated 5.5 billion people—witnessed a massive contraction in their fiscal space due to rising interest payments.

In 2024 alone, developing countries squeezed out a staggering $384 billion to service interest on external debt. The UN body noted that over the past decade, government interest payments skyrocketed by 102 percent, whereas public revenues grew by a paltry 39 percent.

Consequently, governments are now forced to allocate a dominant share of scarce public resources to servicing debt rather than investing in healthcare, education, and job creation. This fiscal squeeze hits at a time when developing nations face a massive $4.3 trillion annual deficit required to meet the Sustainable Development Goals (SDGs).

The report further highlighted that new external financing has dried up significantly, accounting for a mere 11 percent of total investment in developing economies in 2024, compared to 38 percent in developed nations.

Proposing a way forward, UNCTAD stated that if 94 developing nations were allowed to borrow at the same baseline rates as developed economies, they would collectively save $500 billion annually in interest payments.

The global body argued that mitigating this crisis requires urgent structural action at both national and international levels. This includes implementing stronger domestic debt management, expanding concessionary financing from multilateral development banks, establishing improved debt restructuring frameworks, and executing a wholesale reform of the global financial architecture to ensure long-term stability.