Public debt can drive development by funding critical expenditures, but excessive debt growth poses challenges, especially for developing nations.
- UNCTAD’s 2024 report warns of rising debt risks, urging immediate global action to ensure stability.
Key Findings of the Report
- Global Debt Surge: Public debt reached $97 trillion in 2023, with developing countries' debt rising twice as fast as developed nations.
- India's public debt was recorded at 2.9 trillion US dollars.
- Debt Servicing Strains: 54 developing nations spend more on interest payments than on social sector.
- Unequal Financial System: Developing nations pay 2 to 12 times more in interest than developed countries.
Challenges Posed by the Rising Global Public Debt
- Debt Overhang: High debt levels can stifle economic growth by discouraging investment and consumption.
- Liquidity Challenge: The withdrawal of nearly $50 billion by private creditors from developing countries has worsened liquidity constraints.
- The creditor base with West-dominated institutions (private, multilateral, and bilateral creditors) makes debt restructuring expensive.
Recommendations
- Debt restructuring mechanisms to address coordination challenges.
- Expand contingency financing to prevent debt crises.
- Enhance participation of developing countries in global financial governance.