BY FESTUS OKOROMADU, ABUJA
The United Nations has said that global public debt soared to an all-time high of $92 trillion in 2022 as governments borrowed to counter crises such as the COVID-19 pandemic, with the burden being felt acutely by developing countries.
The UN in a report released on Wednesday in the run up to a G20 Finance Ministers and Central Bank Governors’ meeting on July 14-18, said domestic and external debt worldwide has increased more than five times in the last two decades, outstripping the rate of economic growth, with gross domestic product only tripling since 2002.
Commenting on the report, U.N. Secretary-General, Antonio Guterres, said, “Markets may seem not to be suffering – yet. But people are.”
The U.N. noted that some of the poorest countries in the world are being forced into a choice between servicing their debt, or serving their people.
“Developing countries owe almost 30 percent of the global public debt, of which 70 percent is represented by China, India and Brazil. Fifty-nine developing countries face a debt-to-GDP ratio above 60 percent – a threshold indicating high levels of debt,” the report revealed.
The report further hinted that debt has been translating into a substantial burden for developing countries due to limited access to financing, rising borrowing costs, currency devaluations and sluggish growth.
Furthermore, the international financial architecture made access to financing for developing countries both inadequate and expensive, the UN said, pointing to net interest debt payments exceeding 10% of revenues for 50 emerging economies worldwide.
“In Africa, the amount spent on interest payments is higher than spending on either education or health,” the report found, with 3.3 billion people living in countries that spend more on debt interest payments than on health or education.
“Countries are facing the impossible choice of servicing their debt or serving their people.
“Private creditors, such as bondholders and banks, represent 62% of developing countries’ total external public debt.
“In Africa, this creditor participation grew from 30 percent in 2010 to 44 percent in 2021, while Latin America has the highest ratio of private creditors holding external government debt for any region at 74 percent,” the UN noted.
It said multilateral lenders should expand their financing, with measures such as a temporary suspension of International Monetary Fund surcharges – commissions charged to borrowers using its credit lines extensively – and increased financing access for countries in debt distress.
The debt treatment framework was adopted by the Group of 20 major economies and official creditors in October 2020, and aims to include non-Paris Club members such as China in debt relief.
