The global debt crisis has reached unprecedented heights, with public debt hitting a record $97 trillion in 2023, as reported by the United Nations. This alarming surge calls for urgent international reforms to stabilize economies and support sustainable development.
Global debt has been escalating due to a confluence of crises, including the COVID-19 pandemic, climate change, and the cost-of-living crisis. These factors have drastically increased countries' financing needs, pushing many into deeper debt. Developing nations are particularly hard-hit, bearing a disproportionate share of the debt burden. They owe about 30% of the global public debt, with countries like China, India, and Brazil accounting for a significant portion.
Yet Biden wants to mass cancel what people who borrowed to go to college and greatly increase their lifetime earnings owe the country.👇https://t.co/eMuJKzwWSn pic.twitter.com/YzEmEBw0M2
— Neal McCluskey (@NealMcCluskey) July 2, 2024
The structure of the international financial system exacerbates the situation for these developing nations. They face higher borrowing costs and limited access to affordable financing, which hampers their ability to invest in critical areas such as healthcare and education. In fact, 3.3 billion people live in countries that spend more on interest payments than on essential services.
In Africa, the crisis is particularly severe. The number of African countries with debt-to-GDP ratios above 60% has increased from six to 27 between 2013 and 2023. These countries often pay borrowing costs four times higher than the U.S. and up to 12 times higher than Germany, further straining their economies.
Institutions like the IMF keep wading into countries' debt problems by getting them into more debt.
There are hardly any countries that went from "developing" to "developed" status over the past five decades. The global monetary system is structured to keep countries dependent. pic.twitter.com/kcmMV825NL
— Lyn Alden (@LynAldenContact) June 15, 2024
The OECD's 2024 Global Debt Report highlights that sovereign and corporate bond debt markets are under significant pressure. Total global debt stood at nearly $100 trillion at the end of 2023, reflecting the enormous scale of borrowing required to manage ongoing economic challenges. This report underscores the need for policy interventions to mitigate financial stability risks.
The United Nations has outlined a roadmap for addressing the crisis, focusing on three key areas: reducing the high cost of debt, massively scaling up affordable long-term financing, and expanding contingency financing for countries in need. Implementing these measures is critical to building a more inclusive and sustainable global economy.
The global community has begun to recognize the severity of the issue. The Bridgetown Agenda, led by Barbados Prime Minister Mia Mottley, and the Summit for a New Global Financial Pact in Paris have proposed significant debt relief measures. These initiatives aim to create an effective debt workout mechanism, support payment suspensions, and re-engineer multilateral development banks to better support sustainable development.
As the G20 prepares to meet in September, there is hope that these proposals will gain traction, offering much-needed relief to developing nations struggling under the weight of crushing debt. The international community must act swiftly to implement these reforms and prevent further economic deterioration.
