La Jornada: Debt interests of developing countries increase more than double their income

In the recent decade, interest payments by developing countries increased 102 percent, while revenue collection increased 39 percent, according to a report by the United Nations Conference on Trade and Development (Unctad).

“Interest costs have grown much faster than the ability to pay in developing countries, indicating a deterioration in the sustainability of their public debt and putting pressure on the financial resources available to advance development agendas,” the organization explains in a report.

Unctad highlights that between 2014 and 2024, interest payments on public debt in developing countries increased 2.6 times faster than government revenues. “The need to allocate an increasing proportion of government revenues to interest payments reduces fiscal space and crowds out other public expenditures, including those necessary to achieve the Sustainable Development Goals (SDGs),” the report states. Development financing: External flows of financial capital to developing countries and their costs.

This increase in the cost of access to capital occurs in the majority of developing countries – as international organizations have ended up calling a large group of nations that are “in transition from underdevelopment to development” – which, although they have more possibilities for financing than poor countries, pay much more to go into debt than rich ones.

According to Unctad, 73 percent of developing countries experienced a reduction in fiscal space between 2018 and 2024, with the cost of interest on their debt increasing, which ultimately ended up displacing spending on other items, such as the SDGs.

“The inability to access affordable long-term capital and the loss of fiscal space are identified as key factors contributing to the failure of many developing countries to invest sufficiently in their sustainable development agendas,” the report notes.

The organization states that according to a study, if 94 developing countries could borrow at the same rates as rich countries, they would collectively save around $500 billion per year in interest payments.

That amount of money, which is currently going to the financial markets, could pay for the construction of around 375 thousand schools, 1.3 million primary health clinics or more than 65 thousand kilometers of dual carriageway roads in rural areas.

They could also cover the costs of feeding some 1.6 billion children with a diverse minimum diet or finance more than 920 gigawatts of solar capacity installed in these countries, he points out.

Expensive and insufficient

And although financing is expensive, it is not enough. According to Unctad, in 2024, non-resident financial flows to developing countries amounted to nearly $1.5 trillion, distributed almost equally between equity and debt instruments.

However, both when adding internal and external financing sources, these are around 4.3 trillion dollars below what is required annually for developing countries to achieve the SDGs, the organization highlights.