The United Nations secretary-general warned Wednesday that nearly 40% of the developing world is in serious debt, as public debt reached a record $92 trillion last year.
"Some 3.3 billion people — almost half of humanity — live in countries that spend more on debt interest payments than on education or health," Antonio Guterres told reporters. "And yet, because these unsustainable debts are concentrated in poor countries, they are not judged to pose a systemic risk to the global financial system."
Guterres said debt is an important financial tool that can drive development and help governments to protect and invest in their people.
"But when countries are forced to borrow for their economic survival, debt becomes a trap that simply generates more debt," he cautioned.
The U.N. chief spoke at the launch of "A World of Debt," a new report from his global crisis response group. Among its findings, the report said the burden is heavier for developing countries due to external debts, cascading crises, and the high and rising cost of borrowing. They now rely more on private creditors, making credit more expensive and debt restructuring more complicated. And while developing countries carry much less debt than developed ones, they pay much more for it.
"On average, African countries pay four times more for borrowing than the United States and eight times more than the wealthiest European countries," Guterres said.
The report also found that 59 developing countries are struggling with a debt-to-GDP ratio of 60% or higher — an international threshold indicating high debt. That's up from 22 countries in 2011.
The secretary-general acknowledged that substantive reforms to the global financial system will not happen quickly, but suggested steps that can be implemented now. They include the creation of a debt workout mechanism that supports payment suspensions and longer lending terms and lower rates, including for vulnerable middle-income countries.
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