Rising Debt Costs Squeeze Developing Nations, Stall Progress on Climate, UNCTAD Report Finds
- Rising debt costs are squeezing developing nations, leaving the governments with less money to invest in schools, healthcare, infrastructure, and climate action
- A new UNCTAD report showed that between 2018 and 2024, 99 countries lost fiscal space as interest payments surged, crowding out essential public spending
- The findings highlight an urgent need for reforms and stronger international support to reduce borrowing costs and close the $4.3 trillion annual financing gap for the Sustainable Development Goals
A new report from the United Nations Conference on Trade and Development (UNCTAD) has disclosed that rising borrowing costs are leaving many developing nations with less money to invest in schools, healthcare, infrastructure, and climate action.
Between 2018 and 2024, 99 developing countries, home to 5.5 billion people, saw interest payments rise sharply, reducing the share of government revenue available for development spending.
Source: Getty Images
According to the report, 73% of developing countries lost fiscal space as debt servicing crowded out investment in essential public services.
UNCTAD notes:
“Public debt can help finance development, but when it becomes too large or too costly, it can weigh heavily on economies, particularly in developing countries.”
UNCTAD: Financing gap for Sustainable Development Goals
Developing countries received nearly $1.5 trillion in external financial inflows in 2024, split between equity-based investment and borrowing. However, this remains far below what is needed to achieve the Sustainable Development Goals.
The annual financing gap is estimated at $4.3 trillion, requiring both domestic and external financing to increase by about one third from current levels. Closing this gap would mean an additional $230 billion each year in debt and equity financing.
UNCTAD: Rising debt servicing costs
Debt servicing costs are rising faster than repayment capacity. In 2024 alone, developing countries paid $384 billion in interest on external debt. Between 2014 and 2024, government interest payments rose 102%, while revenues increased only 39%.
If 94 developing countries could borrow at the same rates as developed economies, they could save around $500 billion annually, enough to finance: 375,000 schools. 1.3 million primary health clinics, 920 gigawatts of solar power.
What is UNCTAD?
The United Nations Conference on Trade and Development (UNCTAD) is a permanent intergovernmental body established in 1964. It works to promote inclusive and sustainable development by helping developing countries integrate into the global economy on fairer terms.
UNCTAD provides research, policy advice and technical assistance across trade, investment, finance and technology. Its reports highlight global economic trends, challenges and opportunities, with a strong focus on reducing inequality and supporting the achievement of the Sustainable Development Goals.
Source: Getty Images
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