A debt crisis crushing half our world.

Some 3.3 billion people – almost half of humanity – live in countries that spend more on debt interest payments than on education or health.

And yet, because most of these unsustainable debts are concentrated in poor countries, they are not judged to pose a systemic risk to the global financial system.

This is a mirage.

3.3 billion people affected is more than a systemic risk. It is a systemic failure.

Markets may not be suffering – yet. But people are, as our latest report shows.

Some of the poorest countries in the world are being forced into a choice between servicing their debt, or serving their people.

In 2022, global public debt reached a record $92 trillion US dollars. Developing countries shoulder a disproportionate amount.

On average, African countries pay four times more for borrowing than the United States and eight times more than the wealthiest European economies.

A total of 52 countries – almost 40 percent of the developing world – are in serious debt trouble.

It is one result of the inequality built into our outdated global financial system, which reflects the political and social power dynamics of the era when it was created.?

That system has not fulfilled its mandate as a safety net to help all countries manage today’s cascade of unforeseen shocks – the pandemic; the devastating impact of the climate crisis; and the Russian invasion of Ukraine.

Debt is an important financial tool that can drive development and enable 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.

Our report on this unfolding crisis also offers a roadmap to global financial stability – a roadmap already put forward in our Policy Briefs on reforms to the Global Financial Architecture and the SDG Stimulus.

Deep reforms to the global financial system will not happen overnight. But there are many steps we can take right now:

• An effective debt workout mechanism that supports payment suspensions, longer lending terms, and lower rates, including for vulnerable middle income countries.
• The scaling-up of development and climate finance by increasing the capital base and changing the business model of Multilateral Development Banks.
• Stronger coordination between the banks, to transform their approach to risk without losing their triple A credit rating, so that they can massively leverage private finance at affordable cost to developing countries.

The Bridgetown Agenda led by Prime Minister Mia Mottley of Barbados and the recent summit hosted by President Macron of France generated other important proposals. The upcoming G20 Summit is an opportunity to take these ideas forward.?

Action will not be easy - but it is essential, and urgent.?