New Delhi : In a stark revelation, the United Nations Conference on Trade and Development (UNCTAD) has released its A World of Debt Report 2025, highlighting the unprecedented surge in global public debt, which reached a staggering $102 trillion in 2024. This figure, up from $97 trillion in 2023, marks a 7.36% increase year-over-year and underscores the escalating financial challenges faced by nations worldwide, particularly developing countries. The report, published on July 2, 2025, paints a grim picture of a global economy grappling with cascading crises, sluggish growth, and an international financial architecture that disproportionately burdens low- and middle-income countries (LMICs). As the world prepares for the 4th International Conference on Financing for Development in Sevilla, the report calls for urgent reforms to address these mounting challenges and avert a deepening crisis that threatens sustainable development and climate action.
The Alarming Rise of Global Public Debt
According to UNCTAD, global public debt, comprising both domestic and external general government debt, soared to $102 trillion in 2024, a $5 trillion increase from the previous year. This figure, which includes nominal values in current US dollars, reflects a troubling trend driven by a combination of cascading crises and uneven global economic performance. The report notes that public debt has been rising rapidly since 2010, with developing countries bearing a disproportionate burden despite accounting for only 31% ($31 trillion) of the total debt. This share has grown twice as fast as in developed economies over the past 15 years, increasing from 16% in 2010 to 30% in 2023.
The regional distribution of debt reveals stark disparities. Asia and Oceania hold 24% of global public debt, equivalent to three-quarters of the total debt owed by developing countries. In contrast, Latin America and the Caribbean account for 5%, and Africa holds less than 2%. However, the burden of this debt varies significantly based on the cost and maturity of financing available to these regions, exacerbated by inequalities embedded in the global financial system. Developing countries, home to 83% of the world’s population but only 39% of global GDP, face substantial financing gaps that hinder progress toward the Sustainable Development Goals (SDGs).
High Borrowing Costs and Debt Service Burdens
One of the most alarming findings of the UNCTAD report is the high cost of borrowing for developing countries, which is two to four times higher than for the United States. This disparity increases the resources needed to service debt, making it challenging for these nations to finance critical investments while maintaining debt sustainability. In 2023, developing countries spent $87 billion on external public debt service, with half of these nations allocating at least 6.5% of their export revenues to service external debt—nearly double the 4.7% recorded in 2010.
The report highlights that external public debt reached $3.3 trillion in 2023, a $100 billion increase from the previous year. For more than half of developing countries, external public debt equated to 88% or more of the value of exports of goods and services, driven primarily by fluctuating export performance. The median ratio of external debt service to government revenues has also risen, with half of developing countries allocating at least 8.6% of public revenues to debt servicing in 2023. This leaves fewer resources for essential investments in human capital and sustainable development.
Moreover, developing countries experienced a net resource outflow for the second consecutive year in 2023, paying $25 billion more to external creditors in debt servicing than they received in fresh disbursements. This negative net resource transfer, coupled with widening spreads (the difference between bond yields in developing countries and reference markets like the US), exacerbates financial strain, particularly during times of global economic uncertainty when investors shift to lower-risk assets.
The Human Cost: Prioritizing Debt Over People
The escalating debt burden is having a devastating impact on public budgets, particularly in developing countries. Net interest payments on public debt reached $921 billion in 2024, a 10% increase from 2023, with 61 developing countries allocating 10% or more of their government revenues to interest payments. In Africa and Latin America and the Caribbean, at least half of the countries dedicate a double-digit share of public revenues to interest, doubling the median share from 4% in 2010 to 8% in 2024.
This rapid increase in interest payments is crowding out spending on critical public services such as health and education. Between 2021 and 2023, Africa spent $70 per capita on interest payments, surpassing its $63 per capita on education and $44 per capita on health. In Latin America and the Caribbean, per capita health expenditure only slightly exceeded interest payments. Alarmingly, 22 developing countries spent more on interest than on education, and 45 spent more than on health during this period. As a result, 3.4 billion people—over 40% of the global population—live in countries where interest payments exceed spending on either health or education.
The report underscores the human toll of this crisis, noting that “people—especially vulnerable populations—pay the price.” The need to service debt obligations is constraining investments in essential areas, undermining efforts to achieve the SDGs and exacerbating poverty and inequality.
Climate Crisis and Debt: A Vicious Cycle
The UNCTAD report also highlights the interplay between the global debt crisis and the climate emergency, particularly in developing countries. These nations, which account for 80% of the global population, are often the most vulnerable to climate change impacts but face significant barriers to accessing finance for climate resilience, adaptation, and low-carbon transitions. The report cites the example of Nauru, a small island nation in the Pacific Ocean, which is issuing “golden passports” at $105,000 each to raise funds for climate action. Facing existential threats from rising sea levels, storm surges, and coastal erosion, Nauru’s government plans to relocate 90% of its 12,500 residents to higher ground, a project constrained by limited resources.
The climate finance needs of developing countries are substantial, estimated at $4,888 per capita annually until 2030. However, the growing debt burden and declining Official Development Assistance (ODA) are forcing these nations to borrow further for disaster recovery, creating a vicious cycle that hinders climate action. The report notes that the share of loans in aid for developing countries increased from 28% in 2011–2013 to 33% in 2021–2023, adding to the debt burden. Political headwinds, such as the US withdrawal from the Paris Agreement, have further weakened global climate cooperation, exacerbating the challenges faced by developing nations.
Case Study: Sri Lanka’s Debt Crisis
The report references a case study from the Journal of Financial Stability (February 2024) on Sri Lanka’s economic collapse, illustrating the perils of unchecked borrowing. Large budget deficits financed through foreign borrowings led to external debt accounting for nearly 50% of Sri Lanka’s central government debt by 1990. The COVID-19 pandemic triggered a sudden stop in capital flows, depleting foreign exchange reserves and leading to a default in April 2022. The resulting economic and socio-political turmoil brought the country to a standstill, highlighting the risks of over-reliance on external debt.
UNCTAD’s Call for Reform
UNCTAD emphasizes that the current global financial architecture is ill-equipped to address 21st-century challenges. The report calls for comprehensive reforms to make the system more inclusive and development-oriented, including:
- Enhancing Liquidity in Crises: Increasing the use of Special Drawing Rights, suspending IMF surcharges, and improving access to emergency financing windows linked to countries’ quotas.
- Effective Debt Workout Mechanisms: Addressing deficiencies in current debt resolution processes, which have become slower and costlier since 2020.
- More Concessional Finance: Providing better access to low-cost financing and technical assistance to support debt management.
- Debt Transparency: Mandating full disclosure by countries and creditors to improve accountability.
The report highlights the Debt Management and Financial Analysis System (DMFAS) Programme, a 45-year-old UNCTAD initiative that supports 62 countries across Europe, Central Asia, the Middle East, North Africa, Latin America, the Caribbean, South and East Asia, and Sub-Saharan Africa. By offering specialized debt management software, training, and advisory support, DMFAS promotes sustainable debt management and financial independence.
The Path Forward: From Conversation to Action
As the 4th International Conference on Financing for Development approaches, UNCTAD’s report serves as a clarion call for global action. Sixty countries are explicitly advocating for policy reforms to address the debt crisis, emphasizing that developing nations should not be forced to choose between servicing debt and serving their people. The World Bank has echoed this sentiment, urging radical debt transparency and legal reforms to ensure accountability.
The report concludes that the world has long discussed reform, but the time for conversation is over. With global public debt projected to reach 100% of GDP by the end of the decade if current trends continue, urgent action is needed to prevent further economic and social devastation. By addressing the inequalities in the global financial system and prioritizing sustainable development, the international community can pave the way for a more equitable and resilient future.
Frequently Asked Questions (FAQs)
1. What is the current level of global public debt, and how has it changed recently?
Global public debt reached a record $102 trillion in 2024, a $5 trillion increase from $97 trillion in 2023, representing a 7.36% year-over-year rise. This surge is driven by cascading crises and sluggish global economic performance.
2. Why are developing countries disproportionately affected by the debt crisis?
Developing countries owe $31 trillion, or 31% of global public debt, which has grown twice as fast as in developed economies since 2010. They face higher borrowing costs (two to four times those of the US) and allocate significant portions of their revenues to debt servicing, limiting funds for health, education, and sustainable development.
3. How does the debt crisis impact essential public services in developing countries?
In 2024, 61 developing countries allocated 10% or more of government revenues to interest payments, with many spending more on debt than on health or education. For example, Africa spent $70 per capita on interest compared to $63 on education and $44 on health from 2021–2023, affecting 3.4 billion people.
4. What role does the climate crisis play in exacerbating the debt burden?
Developing countries, highly vulnerable to climate change, face financing gaps for climate resilience and adaptation, estimated at $4,888 per capita annually until 2030. Limited resources and declining aid force them to borrow more for disaster recovery, creating a vicious cycle of debt.
5. What reforms does UNCTAD propose to address the global debt crisis?
UNCTAD calls for a more inclusive financial system, enhanced liquidity during crises (e.g., through Special Drawing Rights), effective debt workout mechanisms, increased concessional finance, and improved debt transparency. The Debt Management and Financial Analysis System (DMFAS) Programme supports sustainable debt management in 62 countries.
