Global South Stagnating under Heavier Debt Burden (Jomo Kwame Sundaram)

Much higher interest rates – due to Western central banks – are suffocating developing nations, especially the poorest, causing prolonged debt distress and economic stagnation.

US Fed-induced stagnation

After the greatest US Fed-led surge in international interest rates in more than four decades, developing countries spent $443.5 billion to service their external government and government-guaranteed debt in 2022.

The World Bank’s last International Debt Report showed most of the poorest countries in debt distress as borrowing costs began to surge. The increase has cut into scarce fiscal resources, reducing social spending on health and education.

Debt-servicing costs for all developing countries in 2022 increased by 5% over 2021. The US Fed continued to raise interest rates through 2023, compounding debt distress, while the European Central Bank warns against ‘prematurely’ lowering interest rates.

Read more here:

See also African debt crisis and lessons for Lanka by Ahilan Kadirgamar (also on IDEAS):


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