The Growing Debt Burdens of Global South Countries: Standing in the Way of Climate and Development Goals

Nearly 80 low- and middle-income countries are considered by international institutions as being in or at risk of debt distress. Three-fourths of these countries have also been flagged by environmental experts as particularly vulnerable to the effects of climate change. The combined burden of the climate crisis and increasing debt, perpetuated by an unfair international financial architecture, is a recipe for economic and social devastation: as climate disasters strike, these countries are being forced into choosing between servicing debt and saving lives. This report (authored by Ivana Vasic-Lalovic from the Centre for Economic and Policy Research, 12 October 2023) documents how servicing debt is a direct obstacle to these countries’ ability to respond to climate disasters and to finance basic services and long-term development needs. As a result, countries are trapped in a vicious cycle which keeps them indebted, perpetuates vulnerability to the effects of climate change, and prevents progress on the Sustainable Development Goals (SDGs). The response so far from the international financial community has been inadequate to help countries break this vicious cycle. A more ambitious response — combining an updating of debt resolution frameworks, debt relief, more grant-based finance, and a new allocation of Special Drawing Rights (SDRs) — is urgently needed.

Read the full Executive Summary with link to the full report here.