About 3.3 billion people – almost half of humanity – now live in countries that spend more on paying interest on their debts than on education or health, a UN report released on Wednesday showed.
UN Secretary General Antonio Guterres told a press conference launching the report that because this “crushing debt crisis” is concentrated mostly in poor developing countries, it is “not judged to pose a systemic risk to the global financial system”.
“This is a mirage – 3.3 billion people is more than a systemic risk, it is a systemic failure,” the UN chief warned.
Mr Guterres said financial markets may seem not to be suffering yet – but billions of people are and the levels of public debt “are staggering and surging”.
“In 2022, global public debt reached a record $92 trillion and developing countries shoulder a disproportionate amount,” he said.
The Secretary General said a growing share of debt is held by private creditors who charge sky-high interest rates to developing countries. As an example, he cited African countries that on average pay four times more for borrowing than the US and eight times more than the wealthiest European countries.
The debt crisis is leaving governments with no money to invest in lagging UN development goals for 2030 that include ending extreme poverty, ensuring that every child has a good-quality primary and secondary school education, and investing in the transition to renewable energy, he said.
The report says public debt has reached “colossal levels” largely due to two factors: first, countries’ financial needs soared as they tried to fend off the impact of cascading crises including the Covid-19 pandemic, the rising cost of living and climate change, and second, the global financial architecture “makes developing countries’ access to financing inadequate and expensive”.
The report by the UN Global Crisis Response Group sets out a road map to global financial stability including major reforms to the global financial architecture, especially the International Monetary Fund and the World Bank.
It also includes a new “mechanism” to tackle debts that includes suspending payments, longer lending terms and lower interest rates, including for vulnerable middle-income countries.
