Menu

Developing countries are facing mounting financial pressure as higher borrowing costs consume resources that could otherwise be invested in healthcare, education and other critical development priorities, according to the latest World of Debt report from the United Nations Trade and Development (UNCTAD).

The report warns that debt is increasingly serving as a financial burden rather than a tool for growth. “Debt should help countries invest in their future. But in many developing countries, the servicing of external debt now exceeds new inflows,” UNCTAD noted.

Since 2022, developing nations have spent more on servicing external public debt than they have received through new lending. As a result, external borrowing is no longer generating additional resources for development. Instead, many countries are turning to domestic borrowing, which often carries significantly higher costs.

According to the report, global public debt climbed to $111 trillion in 2025, more than double the $49 trillion recorded in 2010. While developed economies account for over two-thirds of total public debt, debt levels have risen at a much faster pace across the developing world.

Developing countries also continue to face substantially higher borrowing costs. On average, they paid interest rates of 5.2 per cent on public debt, compared with 2.2 per cent for developed economies.

This disparity has driven a sharp increase in debt-servicing expenses. Interest payments by developing countries rose from $363 billion in 2010 to nearly $1 trillion in 2025, placing growing strain on national budgets.

UNCTAD highlighted the impact on public services, noting that in 51 developing countries, home to around 3.7 billion people, governments now spend more on debt interest payments than on health or education.

The report suggests that narrowing the gap in borrowing costs could unlock major benefits. If developing countries were able to access financing on terms similar to those available to developed economies, they could save an estimated $500 billion annually in interest payments.

Such savings could have a transformative effect, potentially funding around 1.3 million primary healthcare centres or providing a nutritionally diverse minimum diet for approximately 1.6 billion children each year.

To address the growing debt challenge, UNCTAD is calling for action at both global and national levels. Globally, it recommends reversing declines in official development assistance, increasing lending by multilateral and regional development banks, and expanding technical support to strengthen countries’ financial management capacities.

At the national level, the organisation urges governments to improve macroeconomic management, strengthen public institutions, optimise debt portfolio structures and make greater use of innovative financing instruments.

The report is released ahead of a key meeting linked to the Borrowers’ Platform initiative, scheduled for 12 October in Bangkok during the IMF-World Bank Annual Meetings.

The Borrowers’ Platform, led by member states with UNCTAD serving as secretariat, provides a forum for borrowing nations to exchange knowledge, share experiences and build a stronger collective voice on debt-related issues.

The Bangkok gathering will mark the first ministerial-level meeting of the Platform’s Governing Council and formally launch its full operational phase, creating a more structured space for peer learning, capacity building and cooperation among borrowing countries.