In the latest edition of its “A World of Debt” report, the UN Trade and Development Organisation (UNCTAD) has warned of a severe external debt crisis in the developing countries, which has doubled since 2010 to reach approximately $31 trillion.
Debt-servicing costs rose by about 10 per cent last year compared to 2023. Interest payments, excluding the repayment of the principal, now exceed the amount that developing countries spend on education or healthcare, and in some cases surpass both combined.
This is neither the first, nor will it be the last report to sound such alarms over the perils of the debt crisis. It is unlikely that the so-called “world order,” with its old leadership entrenched in practices that steadily undermine its already outdated framework, will automatically address this crisis or mobilise the necessary resources to do so.
Various reports long warned of even greater threats to international peace and security, yet no action was taken until it was too late.
A case in point was the disregard shown towards the reports of the Global Preparedness Monitoring Board on confronting epidemics and pandemics, including the 2019 “World in Danger” report, which put forward seven recommendations for addressing future pandemics. This report was disregarded until the Covid-19 pandemic broke out in 2020, leaving the world mourning its victims and suffering from a humanitarian and economic toll that persists to this day.
One of the lessons to be drawn from previous crises, and neglected report, is that the developing countries should not expect any favours from some old guardians of a world “order” who devote their remaining time at the helm to fomenting conflicts and disrupting the international arena, in the belief that such tactics might prolong their grip on power.
Among the initiatives that must be implemented without delay to confront the debt crisis is the creation of a joint platform that will unify the ranks of the debtor countries, coordinate their positions in international institutions, address the bias and lack of evenhandedness they face, and facilitate their access to information on investment, finance, international debt, and related markets.
Such a platform would enable them to obtain technical support from economic decision-making institutions such as ministries of finance, and particularly from central banks, and to strengthen their negotiating position with lenders.
One of the outcomes of the 4th International Conference on Financing for Development that was held in Seville in Spain from 30 June to 3 July was an explicit call for “support for the establishment of borrower-led forums that can enable countries to share experiences, strategies, and good practices” on debt and strengthen the voice of borrowers.
Similarly, the seventh action recommended in the United Nations Expert Group on Debt report urged the creation of “a forum for borrowers to share knowledge and experiences, provide advice, and enhance the effectiveness of their representation and voice in international forums.”
Such a platform could be called the “Sustainable Development Investors Club,” a term developed during a discussion with distinguished economist Homi Kharas, the senior fellow at the Brookings Institution in the US. The name reflects the principle that international borrowing should be always rooted in the need to invest in development projects, that are justified solely by their feasibility and repayment capacity, and that are pursued within an optimised financing framework after carefully comparing all alternatives, costs, and returns.
Had they been guided by such criteria, many developing countries might have avoided falling repeatedly into international debt traps.
The Club must be built on an efficient and effective institutional structure. Its core membership should consist of founding members from all regions of the Global South, excluding net lender nations, with a broader circle of other countries and institutions that may participate as observers.
A steering committee, made up of members serving fixed terms, should be composed of finance ministers and central bank governors, and should reflect a diverse geographical representation and varying country sizes.
The Club should also be supported by a technical secretariat made up of qualified professionals that would act as a bridge between its members and a network of international experts engaged in the institution’s work in debt management or in preventing and responding to crises should they arise.
There are various possible approaches to establishing this Club; the most effective could be through partnerships in a non-profit organisation similar to the Global Alliance for Vaccines (GAVI). Such a structure would provide the flexibility needed to fulfil its mandate, engage with international institutions and organisations on an equal footing, and continuously innovate in its development, while ensuring full transparency in the preparation and publication of reports.
The chosen organisational model should reflect evolving global trends and financing landscapes, where private sector institutions and voluntary and charitable organisations hold a distinct and increasingly influential role that should not be overlooked.
The countries of the Global South will also have an opportunity to participate in another debt-related institution, as recommended by the outcomes of the 4th International Conference on Financing for Development (FFD4). The mission of this, an international debt forum, would differ from that of the Sustainable Development Investors (borrowers) Club.
This forum can be called the “Seville Forum” after the city that successfully hosted the FFD4 Conference and should bring together both borrowers and lenders. Its membership would include all bilateral and multilateral official lenders, and private credit providers, as well as all sovereign borrowers from both the developing and developed countries.
Its main priority would be to develop and implement standards for responsible lending and borrowing. It would hold discussions informed by updated technical reports on capital market conditions, including debt, and proposed policy measures. It would also serve as a platform for exchanging views on reforming the global financial architecture and its institutions, including those related to credit ratings and methodologies.
The Forum should also have a technical secretariat to manage its operations, along with a balanced steering committee representing all lending and borrowing parties. If it evolves as intended, it could play a vital role in dealing with the current international debt crisis facing many developing economies, and preventing future ones.
This article also appears in Arabic in Wednesday’s edition of Asharq Al-Awsat.
* A version of this article appears in print in the 14 August, 2025 edition of Al-Ahram Weekly
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