Record Global Public Debt Reaches $97 Trillion, U.N. Reports

Global public debt surged to an unprecedented $97 trillion in the previous year, as reported by the United Nations on Tuesday, June 4. A significant portion of this debt, about one-third, is attributed to developing countries, severely limiting their ability to fund essential services such as healthcare, education, and climate action.

The U.N. Conference on Trade and Development (UNCTAD), which issued a report titled “A World of Debt,” revealed that government debt increased by $5.6 trillion from 2022. The report highlights that escalating interest payments are outpacing the growth of crucial public expenditures.

“Developing countries must not be forced to choose between servicing their debt or serving their people,” the report emphasized. “The international financial architecture must change to ensure a prosperous future for both people and the planet.”

Developing Nations Overburdened by High Interest Payments

In the developing world, home to 3.3 billion people, one in three countries spends more on interest payments than on essential human development programs, including healthcare, education, and climate action.

In 2023, the public debt of developing countries reached $29 trillion, accounting for approximately 30% of the global total—an increase from a 16% share in 2010. UNCTAD attributes the rapid rise in global public debt to “cascading crises” and the sluggish, uneven global economic performance, noting that debt in developing countries is growing at twice the rate seen in wealthier nations.

The United States led the world in public debt with over $33 trillion last year, followed by China at nearly $15 trillion and Japan at $10.6 trillion.

Significant Debt Among Developing Countries

Among developing nations, Egypt, Mexico, Brazil, and India have joined China as the countries with the highest levels of public debt. The economic situation in Africa has been particularly impacted, with median public debt as a share of economic output rising to 62% last year.

The cost of borrowing has increased globally, pushing interest on public debt up to $847 billion last year—a 26% rise from two years earlier, according to UNCTAD.

Calls for Debt Relief and Financial Reform

Last month, U.S. President Joe Biden and Kenyan President William Ruto called for global efforts to alleviate the massive debt burdens of developing countries. They suggested measures such as reducing financing barriers and coordinating debt relief through multilateral financial institutions.

A $1.2 trillion government funding bill passed by the U.S. Congress in March includes provisions for the U.S. to lend up to $21 billion to an International Monetary Fund (IMF) trust that provides zero-interest loans to support low-income countries.

“Too many nations are forced to make a choice between development and debt, between investing in their people and paying back their creditors,” President Biden stated.

The African Union, now a permanent member of the G20, has also been vocal on this issue. South Africa, set to assume the G20 presidency in December, views this as an opportunity to champion the aspirations of emerging markets and advocate for financial reforms to ease the debt burden on developing nations.

Picture Cred: Investment Executive