Some 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, according to a new U.N. report released Wednesday.
U.N. Secretary-General Antonio Guterres told a press conference launching the report that because this “crushing debt crisis” is concentrated mostly in poor developing countries, it is “not judged to pose a systemic risk to the global financial system.”
“This is a mirage,” the U.N. chief warned. “3.3 billion people is more than a systemic risk, it is a systemic failure.”
Guterres said financial markets may seem not to be suffering yet — but billions of people are and the levels of public debt “are staggering and surging.”
“In 2022, global public debt reached a record $92 trillion and developing countries shoulder a disproportionate amount,” he said.
According to the report, the number of countries facing high debt levels has increased sharply from 22 nations in 2011 to 59 in 2022.
The secretary-general said a growing share of debt is held by private creditors who charge sky-high interest rates to developing countries. As an example, he cited African countries that on average pay four times more for borrowing than the United States and eight times more than the wealthiest European countries.
The debt crisis is leaving governments with no money to invest in lagging U.N. development goals for 2030 that include ending extreme poverty; ensuring that every child has a good-quality primary and secondary school education, and to invest in transitioning to renewable energy, he said.
The report says public debt has reached “colossal levels” largely due to two factors: First, countries’ financial needs soared as they tried to fend off the impact of cascading crises including the COVID-19 pandemic, the rising cost of living and climate change, and second, the global financial architecture “makes developing countries’ access to financing inadequate and expensive.”
The International Monetary Fund says 36 countries are on “so-called `debt row’ – either in, or at high risk of debt distress,” Guterres told reporters. “Another 16 are paying unsustainable interest rates to private creditors (and) a total of 52 countries – almost 40% of the developing world – are in serious debt trouble.”
U.N. trade chief Rebeca Grynspan stressed “the sheer magnitude and speed at which public debt has grown,” pointing to a more than fivefold surge since 2000, “significantly outpacing global GDP growth that has only tripled in the same period.”
Regionally, between 2010 and 2022, the amount of government debt increased by almost four times in Asia and the Pacific, three times in Africa, 2.5 times in Europe and Central Asia, and 1.6 times in Latin America and the Caribbean, Armida Alisjahbana, executive secretary of the U.N. Economic and Social Commission for Asia and the Pacific, told reporters.
The report by the U.N. Global Crisis Response Group sets out a roadmap to global financial stability including major reforms to the global financial architecture, especially the IMF and World Bank. It also includes a new “mechanism” to tackle debts that includes suspending payments, longer lending terms, and lower interest rates including for vulnerable middle-income countries.
Grynspan told reporters by video from Geneva that a new mechanism is critically needed to restructure debt much faster. Currently, it can take up to 2 ½ years, she said.
Guterres said an upcoming summit of the world’s 20 wealthiest nations in India on Sept. 9-10 is an opportunity to take action on debt relief and other needed financial reforms.
