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UN Warns of Record $92 Trillion Global Public Debt in 2022, Urges Urgent Reforms

Global public debt soars to a record-breaking $92 trillion, posing a grave threat. Developing countries face disproportionate burdens while urgent reforms are desperately needed. Uncover the alarming disparities and the UN's call for a fairer and more sustainable financial system.

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A child and her caretaker in a hospital in Marka, Somolia. [UN Photo/Tobin Jones]

The United Nations has issued a grave warning about the escalating global public debt crisis, revealing that the total debt reached a record high of $92 trillion in 2022. This represents a five-fold increase since 2000 and demands immediate action, particularly in developing countries. The report highlights the inequality in the international financial system, with African countries paying significantly higher interest rates compared to the United States and wealthier European economies. Around 40 percent of developing nations, totaling 52 countries, are facing serious debt trouble.

The disparity in interest rates burdens developing countries disproportionately, with half of all developing nations spending a minimum of 7.4% of their export revenues on servicing external public debt. Of great concern is the fact that some governments are allocating more funds to debt servicing than to critical sectors such as health and education. The report reveals that at least 19 developing countries allocate more money to interest payments than education, while 45 allocate more to interest than health expenditure.

The growing reliance on private creditors, who offer more expensive debt and shorter maturities compared to official sources, further complicates debt restructuring for developing countries. Currently, private creditors hold 62% of external public debt, which is an increase from 47% a decade ago. However, there is a lack of mechanisms to address debt restructuring across different creditor classes.

The United Nations is urgently calling for comprehensive reforms in the international financial architecture, including the debt architecture, to create a more inclusive system that empowers developing countries to participate actively in the governance of the global financial system. It emphasizes the importance of addressing the high cost of debt and the mounting risk of debt distress.

To expedite progress under the G20 Common Framework for Debt Treatment, which has faced challenges due to creditor coordination issues and the absence of automatic debt service suspension clauses, the establishment of a debt workout mechanism is crucial. Developing countries, especially those with high debt burdens, require increased liquidity during times of crisis to prevent a liquidity crisis from turning into a full-blown debt crisis. This can be achieved by expanding contingency finance and implementing measures such as enhancing the use of Special Drawing Rights, temporarily suspending IMF surcharges, and broadening access to emergency financing through increased quotas.

The report also stresses the need for a substantial increase in affordable long-term financing. To accomplish this, multilateral development banks need to be transformed and expanded to support sustainable long-term development and mobilize more private resources on equitable terms. Additionally, there is an urgent call for more concessional finance to fulfill aid and climate finance commitments.

The UN Global Crisis Response Group on Food, Energy, and Finance (GCRG), established in March 2022 by UN Secretary-General António Guterres, aims to address the interconnected crises of food, energy, and finance. These crises, including inflation, food insecurity, rising energy and food prices, supply chain disruptions, and mounting debt, pose significant challenges to global recovery from the COVID-19 pandemic and the ongoing threats of climate change and the conflict in Ukraine.

The report “A world of debt: A growing burden to global prosperity” was jointly prepared by the GCRG, the UN Conference on Trade and Development (UNCTAD), and the five UN Regional Economic Commissions: ECA, ECE, ECLAC, ESCAP, and ESCWA.

Sri Lanka Guardian

The Sri Lanka Guardian is an online web portal founded in August 2007 by a group of concerned Sri Lankan citizens including journalists, activists, academics and retired civil servants. We are independent and non-profit. Email: editor@slguardian.org

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