Growing costs for developing countries
Developing country debt reached $9.4tn (£7tn) last year. This increase of 5.5% was driven by rapid growth in private sector lending. For countries eligible for concessional lending from the World Bank, the average interest rate on new borrowing hit 8.2%. The rate is the highest since the 1980s. Preliminary data for 2026 shows lending continues at a rapid pace. I find the specific interest rates for certain nations particularly stark, such as the 13.88% rate for the Republic of Congo, the 11.5% rate for Laos, and the 9.2% rate for Kenya. Haishan Fu, the World Bank chief statistician, said: "Access to international finance has improved, but the price of that finance has not. Low- and middle-income countries are borrowing more, paying more, and, in many cases, leaving less for long-term development." High debt servicing costs prevent governments from investing in the future. The World Bank also found that global shocks have more impact on food availability in heavily indebted countries. Food and nutrition security provides a concrete example of these interactions, illustrating how debt burdens may be closely associated with a decline in the affordability of a healthy diet.
UK leads push for debt reform
The UK government prepares for its presidency of the G20 next year by planning a "new drive on debt" that prime minister Andy Burnham links to confronting the legacy of slavery. Burnham appointed former Labour prime minister Gordon Brown to examine the feasibility of changes to the global debt regime in the run-up to the UK’s G20 presidency next year. Last month, UK foreign secretary Ed Miliband spoke at the IMF annual meetings in Bangkok about a "new deal" for heavily indebted countries. The proposal would involve mobilizing the balance sheets of the World Bank and other multilateral development banks to buy back debt to extend repayment periods and lower interest rates. The situation is more complex than the 2005 Gleneagles summit because today’s creditors are often private-sector bondholders. African Union heads of state and G20 chairs from Brazil and South Africa have also demanded changes to the international debt framework in recent years.
