Surging borrowing costs have pushed interest rates for the most vulnerable nations to levels unseen in decades, effectively crowding out essential development funding. Private sector lending fueled a 5.5% expansion in total obligations over the past year, complicating traditional diplomatic restructuring pathways. In response, British officials are drafting a new global initiative for their upcoming G20 presidency that would enlist multilateral banks to buy back debt and stretch out maturities.
Key points
Escalating debt service expenses are hindering developing governments from funding vital…: Escalating debt service expenses are hindering developing governments from funding vital domestic priorities and worsening food affordability.
Restructuring modern sovereign debt is significantly more challenging than past initiativ…: Restructuring modern sovereign debt is significantly more challenging than past initiatives because private-sector bondholders now hold most of the claims.
The UK intends to utilize its G20 presidency to push a multilateral framework aimed at lo…: The UK intends to utilize its G20 presidency to push a multilateral framework aimed at lowering interest rates and extending loan repayment timelines.
Sources checked by our analysis pipeline: 1
Debt owed by developing countries rose to a record $9.4tn (£7tn) last year, with the poorest paying the highest interest rates since the late 1980s, World Bank data shows.
The UK government is preparing to champion a “new drive on debt” as part of its presidency of the G20 next year – a move the prime minister, Andy Burnham, has linked to confronting the legacy of slavery.
In its annual International Debt Report, the World Bank said the rising cost of servicing external debt was preventing some governments from investing for the future.
The increase in developing country debt last year, of 5.5%, was the fastest in four years, the report finds – driven by a rapid rise in private sector lending.
The World Bank’s chief statistician, Haishan Fu, said: “Access to international finance has improved, but the price of that finance has not. Low- and middle-income countries are borrowing more, paying more, and, in many cases, leaving less for long-term development.”
On average, the report found the poorest countries – those eligible for concessional lending from the World Bank…
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