'The World’s Debt Feast' Global Public Debt Reaches 1,200 Trillion Won... Fivefold Increase Over 20 Years

UN Report Released
GDP Tripled in 20 Years, Debt Increased Fivefold
"40% of Developing Countries Face Debt Crisis"

Global public debt reached a record high of $92 trillion (approximately 11,765 trillion won) last year. This was the result of countries significantly increasing government spending due to the COVID-19 pandemic and other factors. Among this, the debt of developing countries has reached a dangerous level, raising urgent calls for restructuring.

[Image source=Yonhap News]

The United Nations (UN) announced in a report released on the 12th (local time) that the size of global public debt increased from $17 trillion in 2002 to $92 trillion in 2022. Public debt refers to the liabilities of governments and public institutions and does not include private debt such as household or corporate debt.

The UN expressed concern about the rapid increase in national debt among countries. While the global gross domestic product (GDP) tripled over the past 20 years since 2002, domestic and external public debt of countries grew more than fivefold, significantly outpacing economic growth. This is analyzed as a result of major countries implementing expansionary fiscal policies relative to their economic size.

Additionally, the UN warned that 52 countries, about 40% of developing countries, are facing severe debt problems. Currently, developing countries account for about 30% of global public debt. Among these developing countries, 95 have a debt-to-GDP ratio exceeding 60%. Although circumstances vary by country, public debt is generally required to be managed within 60% of GDP, but nearly 100 developing countries have exceeded this threshold. This includes the significant impact of China’s indiscriminate lending of vast funds to Asian and African countries to expand the Belt and Road Initiative (land and maritime Silk Road) projects and increase its influence.

Global Public Debt Increase Trend (*Source: UN)

Difference in Procurement Interest Rates Between Developed and Developing Countries (*Source: UN)

The UN analyzed that borrowing costs for developing countries have surged due to rising interest rates caused by major countries’ rate hikes starting last year and the increased repayment burden on dollar-denominated bonds amid a strong dollar. Among emerging developing countries worldwide, 50 countries spend more than 10% of government revenue on interest payments. In particular, in Africa, governments allocate more tax revenue to interest payments than to education and health expenditures. The report pointed out that 3.3 billion people live in such countries.

The UN stated, "Debt is a significant burden for developing countries," noting that "restricted access to financing, rising borrowing costs, currency depreciation, and sluggish growth are pressuring developing countries." According to UN research, while the United States pays 3.1% interest annually and Germany 1.5% when issuing government bonds to raise funds, Asia and Oceania bear 6.5%, South America 7.7%, and Africa 11.6% interest rates (based on data from January 2022 to May this year).

To resolve the debt crisis in developing countries, the UN recommended that multilateral lending institutions such as the International Monetary Fund (IMF) step in to reduce debt burdens and improve access to financing. It also pointed out that debt restructuring efforts at the Group of Twenty (G20) level have been considerably slow. The UN emphasized, "A debt restructuring process is needed to address the slow progress of the G20 Common Framework."

Earlier, the G20, including China which holds a significant portion of developing countries’ debt, agreed in 2020 to establish the Common Framework aimed at debt relief for poor countries. However, as some countries like Zambia and Sri Lanka have defaulted, there are criticisms that debt restructuring efforts are too delayed. Ahead of the G20 Finance Ministers’ meeting scheduled for June 14?18, the UN released this report to urge the international community to intensify efforts to support developing countries caught in the debt crisis.

Antonio Guterres, UN Secretary-General, expressed concern, saying, "The market may not yet seem to be suffering, but people are suffering," and "Some of the world’s poorest countries are being forced to choose between debt repayment and caring for their people."

This content was produced with the assistance of AI translation services.