- A new UNCTAD report finds that rising borrowing costs are leaving many developing countries with less money to invest in schools, healthcare, infrastructure and climate action.
- Between 2018 and 2024, 99 developing countries – home to 5.5 billion people – saw rising interest payments reduce the fiscal space available for development.
- Developing countries continue to pay significantly more for external financing than developed economies.
- UNCTAD calls for national reforms and stronger international action to reduce financing costs and expand the scale of, and access to, affordable, long-term finance.
A new UN Trade and Development (UNCTAD) report shows that while developing countries continue to attract external finance, it is insufficient, volatile and comes at a much higher cost than that paid by developed economies.
As borrowing becomes more expensive, governments are spending a growing share of public resources paying interest rather than investing in people and long-term development.
This challenge comes at a time when countries face growing demands to improve infrastructure, strengthen education and healthcare systems and create jobs.
Less room for schools, healthcare and infrastructure
The report finds that rising debt-servicing costs are putting increasing pressure on public finances.
Between 2018 and 2024, 99 developing countries saw rising interest payments reduce the fiscal space available for development spending. Together, these countries are home to 5.5 billion people.
In 2024 alone, developing countries paid $384 billion in interest on their external debt. Over the past decade, government interest payments rose by 102%, while government revenues increased by only 39%.
As more public resources are directed towards debt service, governments have less room to invest in education, healthcare, infrastructure and other development priorities.
Developing countries still pay more for money
The report highlights a persistent imbalance in the international financial system.
Developing countries consistently pay higher costs for external financing – particularly debt financing – than developed economies, despite their significant investment needs.
It is estimated that developing countries need to invest an additional $4.3 trillion annually to achieve the Sustainable Development Goals (SDGs).
