Developing Nations drown in debt, $11.4Tn external debt imperils dutures: UNCTAD
A UNCTAD report reveals developing nations face a severe debt crisis. Their external debt quadrupled to $11.4 trillion in 2023, equivalent to 99% of export earnings. Increased borrowing, volatile commodity prices, and high interest rates exacerbate the issue. Consequently, many countries prioritize debt repayment over essential public services, impacting health and education.
United Nations: A report of UN Trade and Development (UNCTAD) shows a stark status of the developing countries. The data showed that the developing nations are sinking deeper into a debt-driven development crisis.
The report released by UNCTAD in April 2025 mentioned that the external debt of the developing countries has quadrupled in two decades to a record $11.4 trillion in 2023, equivalent to 99% of their export earnings.
Key Drivers of the Developing Nations Debt Crisis
The reasons for the external debt are:
- Increased borrowing for development projects
- Volatile commodity prices
- Widening public deficits
The report further informed that the COVID-19 pandemic which devastated several economies worsened the situation, as nations approached wealthy countries and international financial institutions for borrowing to overcome the economic downfall and fund public health and social schemes.
"While debt can be a vital tool for economic growth and development, it becomes a problem when repayment costs outpace a country’s capacity to pay. That is now the case for two thirds of developing countries,” the report stated.
The report mentioned another startling figure - "the Debt distress now looms over more than half of the 68 low-income countries eligible for the International Monetary Fund’s Poverty Reduction and Growth Trust – more than double the number in 2015.”
The UNCTAD report also highlighted that the high interest rates are also a reason which is increasing the burden on such countries.
To back its claim, the report stated: "In 2023, developing nations paid $847 billion in net interest, a 26% increase from 2021. They borrowed internationally at rates two to four times higher than the United States and six to 12 times higher than Germany.”
The UN report warned that when the governments give importance to debt repayments over public services and investments, people pay the price. Schools are underfunded, hospitals lack supplies and infrastructure crumbles.
In 2023, a historic 54 developing nations – nearly half in Africa – dedicated at least 10% of government funds to debt interest payments. Today, 3.3 billion people live in countries that spend more on debt payments than on health or education, it further stated.