Majority of developing countries are in debt distress amid escalating crisis
- More than half of eligible countries for the IMF’s Poverty Reduction and Growth Trust face severe debt distress.
- Developing nations have seen debt-service costs increase significantly, outpacing their economic growth.
- Urgent intervention is needed to prevent a deepening solvency crisis and help these countries achieve economic independence.
In 2025, the urgent need for affordable financing for economic development in developing countries has become increasingly dire. Recent data reveals that over half of the 68 recognized countries under the International Monetary Fund's Poverty Reduction and Growth Trust are currently in a state of debt distress, a significant rise from previous years. Between 2017 and 2023, these nations experienced a staggering annual increase of nearly 12% in average debt-service costs, significantly outpacing the growth of their exports and remittances, which has led to steep declines in debt sustainability across two-thirds of these countries. In particular, 37 out of 45 African nations with available data are contending with this worsening plight. The reluctance to default among these countries can be attributed to inefficient mechanisms aimed at managing debt resolution, as well as the high political and economic repercussions tied to such actions. Many countries feel trapped between the burden of repaying creditors and the necessity of securing their future, highlighting the failings of traditional debt management strategies. The deterioration of financial stability may soon escalate into a comprehensive solvency crisis that demands immediate solutions. To address this escalating crisis, the United Nations Secretary-General António Guterres established the Expert Group on Debt in December 2024. This group is dedicated to developing and promoting policy solutions that can aid struggling economies, especially those of African nations and small island developing states. Many previous initiatives aimed at addressing sovereign debt issues have not achieved lasting results, but this group distinguishes itself through its urgent scope and strategic focus on political and public engagement in crafting feasible solutions. As the world nears 2030, the timeframe for achieving the Sustainable Development Goals (SDGs), developing countries face a continuous $4 trillion annual shortage in financing. Current trends suggest that without urgent and concerted intervention, these nations may only manage to meet a fraction of their SDG targets. Upcoming international conferences, including the Fourth International Financing for Development Conference, the G20 Summit, and COP30, will serve as critical platforms for the Expert Group as it seeks to engage a diverse coalition of stakeholders capable of implementing necessary structural changes to sovereign debt dynamics, thus ensuring that countries can prioritize investments in their futures without the choking burden of unsustainable debt.