GNV News 2025/10/25

On 2025/10/20, at the 16th United Nations Conference on Trade and Development (UNCTAD16) held in Geneva, it was noted that inequalities have still not narrowed and that many low- and middle-income countries are in a position where they must choose between default and stalled development.

Low- and middle-income countries (Note 1) receive financing mainly from international financial institutions that requires repayment, and in recent years much grant aid has shifted to interest-bearing loans. Amid this, public debt has swelled since 2010 at a pace about 2 times that of high-income countries, reaching 31 trillion US dollars in 2025.

Foreign-currency-denominated debt in particular is highly sensitive to exchange rate fluctuations, and in unstable economic conditions the repayment burden in domestic currency surges. This situation is further exacerbated by an uncertain global economy, including rising tariff barriers led by the United States. 61 low- and middle-income countries devoted at least 10% of public revenue to external debt service in 2024, roughly 2 times the 2010 level. In addition to soaring tariffs, transport costs in landlocked and small island states have reached 3 times the global average, shrinking export volumes and foreign-exchange earnings and further increasing external debt burdens. As a result, investment in low- and middle-income countries with heavy debt-service burdens is seen as riskier, leading to tighter lending terms and capital withdrawal by investors.

In addition, by 2025 tariff rates imposed by major countries rose from an average of 2.8% to over 20%, hindering global trade and investment activity itself. As capital tends to concentrate in lower-risk high-income countries, financing for low- and middle-income countries is becoming more difficult, leading to stalled development.

As a result, in 22 countries among low- and middle-income countries, more funds are allocated to interest payments than to education, and in 45 countries more to interest payments than to health. These countries are home to 3.4 billion people. While new economic markets such as artificial intelligence (AI) are expanding worldwide, as many as 2.6 billion people in low- and middle-income countries remain offline and are not benefiting. If these problems persist, low- and middle-income countries will be forced to choose between stalled development and default.

To address this situation, on 2025/10/22, Spain, with UN backing, established the “Seville Debt Forum” within UNCTAD16. This is a venue to translate into concrete action the “Seville Commitment”—agreed at the “4th International Conference on Financing for Development (FFD4)” held in Seville, Spain in 2025/6 (Note 2)—which sets out plans for fair debt restructuring, lower borrowing costs and greater transparency. Since World War II, the high-income-country-led financial architecture has failed to reflect the voices of low- and middle-income countries. Therefore, at the “Seville Debt Forum”, governments, finance ministers, and creditors from both high- and low- and middle-income countries will gather for dialogue on debt so that borrowing becomes a support for development rather than an obstacle to the economy.

Note 1 In the report and original articles, the term used is “developing countries.”

Note 2 Convened in response to the surge in debt hindering achievement of the Sustainable Development Goals (SDGs).

Learn more about the state of development in low-income countries and progress toward the SDGs → “No one left behind?”

Learn more about the relationship between the global financial system and low- and middle-income countries → “World Bank and International Monetary Fund: Perpetuating poverty?”

Explore the history of debt in Africa → “Africa’s economy: Can it break the cycle of debt?”

Ms. Grynspan warned at UNCTAD16 that many low-income countries are being forced to choose between debt repayment and development financing (Photo: UN Trade and Development (UNCTAD) / Flickr [CC BY-SA 4.0])