By Karin Strohecker and Olivia Le Poidevin
LONDON/GENEVA (Reuters) -A new U.N.-supported forum designed to help tackle the most pressing debt issues across emerging economies was launched on Wednesday as policymakers warned that ever-rising burdens divert vital funds away from much-needed investments.
The Seville Forum on Debt, led by Spain and presented during the 16th session of the U.N. Conference on Trade and Development or UNCTAD in Geneva, aims to bring together creditors and borrowers as well as international financial institutions and academics.
The forum aims to find solutions and come up with actions for issues from debt management to sustainability as global public debt levels scale new records.
“It’s a trade-off when you have to service your debt with servicing costs that – in many instances – go above 10% of GDP, and that means making sacrifices in terms of public education, of health opportunities or even investing in your future,” said Spain’s Economy Minister Carlos Cuerpo.
The UN Secretary-General Antonio Guterres called for fast and fair debt solutions, expressing his support for the initiatives.
“Borrowing should work for, not against, developing countries. But countries are getting crushed,” Guterres told reporters in Geneva.
Global public debt hit a record $102 trillion in 2024 with developing countries owing $31 trillion and paying $921 billion in interest alone, UNCTAD said in a news release.
MANY COUNTRIES SPENDING MORE ON DEBT THAN HEALTH, EDUCATION
Some 3.4 billion people – or more than 40% of the global population – now live in countries that spend more on debt servicing than health or education, the agency said, and there needs to be an urgent and systemic response to tackle the situation.
“The main purpose is not just another report, it’s a report that then can be combined with technical assistance and with a very close link to debtor countries particularly, so that we can have good implementation on the ground and we can help build forward somehow a more sustainable system,” Cuerpo said.
Developing countries spend $1.4 trillion on annual debt servicing, and 61 of them spent 10% or more of their government revenues on interest payments last year.
“Countries should never have to choose between servicing their debt or serving their people,” Guterres said.
UNCTAD Secretary General Rebeca Grynspan said there had been major sovereign default since 2022, and debt-laden countries were coping with the problem through cuts to development budgets and investment in health, schools and infrastructure.
“It’s a slow erosion of development one budget cut at a time…What we have now is perpetual crisis management dressed up as normality,” she said.
How to tackle debt issues for emerging economies has been a pressing issue for years.
Forums such as the Global Sovereign Debt Roundtable have sought to make progress on key issues and streamline processes as a number of countries from Ghana to Zambia and Ethiopia have struggled to emerge from lengthy sovereign debt defaults.
SITUATION WORSENING FOR MANY DEVELOPING NATIONS
Debt experts have warned the situation for many developing nations – especially the poorest – is worsening against a backdrop of wealthy nations from the U.S. to Europe cutting aid and development financing in favour of defence spending.
The Group of 20 major economies, under the leadership of South Africa, has vowed to keep the focus on the developing nations’ debt issues. However, presidency of the group will transfer to the U.S. in a few weeks time.
The Seville Forum on Debt is one of the initiatives coming out of the once-a-decade Conference on Financing for Development that was held in the Spanish city in June.
(Reporting by Karin Strohecker and Olivia Le Poidevin, editing by Sharon Singleton and Ed Osmond)
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