The International Monetary Fund (IMF) released an update on the Global Debt Database (GDD) earlier this month.
Commenting on it in its 2025 Global Debt Monitor, the IMF stated that global debt has “essentially stabilised” at just above 235 per cent of global GDP, amounting to $251 trillion. This can be linked to the decline in private-sector debt to a little over 140 per cent of GDP, which offsets a rise in sovereign borrowing to more than 90 per cent of GDP.
The world’s two largest economies remain the largest borrowers, it said. US public debt now stands at 120 per cent while China’s has risen to 90 per cent of GDP.
Although the debt-to-GDP ratio of developing economies has fallen to 56 per cent of GDP, their debt-servicing burdens have continued to rise due to the increasing cost of borrowing.
As a result, these countries face three critical pressures: first, their essential financing needs far exceed their limited public financial resources; second, their budgets have been drained by urgent spending in response to crises; and third, the sharp decline in foreign direct investment and international development aid has curtailed access to new financing sources.
These mounting concerns have lent impetus to calls to address the developing world’s debt crisis. Although in its modern form this first gained notoriety through the Latin American debt crisis in the 1980s and once again riveted global public opinion during the Asian emerging markets crisis of the 1990s, the current crisis has been marked by silence, as though creditors and debtors have reached a tacit pact to feign calm.
And why shouldn’t they? Creditors are heavily shielded by loan-loss provisions to offset the risk of debtor default, while debtors are trapped in the debt game, which drains their revenues, constrains expenditures, and forces them to cut spending on priorities in order to meet scheduled payment deadlines.
Struggling debtors are not in an enviable position, forced as they are to choose the lesser of two evils. The first is to default, like what happened recently to Sri Lanka, Ghana, Chad, Zambia, and Ethiopia, and expose themselves to the wrath of the financial markets, including credit downgrades, exclusion from new financing, and endless waits for debt restructuring.
The second is to continue to pay their debt-servicing obligations on time, regardless of what this may cost at the expense of funding essential public needs, including education and healthcare. In other words, debtors can avert default on debt only by defaulting on development.
The Fourth International Conference on Financing for Development (FfD4), held in July in Seville, Spain, adopted various resolutions calling for the creation of institutions and mechanisms to address the debt crisis. These drew on 11 practical recommendations submitted by the UN Expert Group on Debt and Development, of which three proposed institutions stand out.
The first is a Debt Forum that would bring together creditors and debtors to discuss their concerns and activate principles of responsible borrowing and lending. The second is an intergovernmental mechanism within the UN to integrate debt reforms into the global financial architecture, while respecting the sensitivities and mandates of international financial institutions. And the third is a Borrowers Club, led by debtor countries, that would counter the seven-decade-old Paris Club of creditor countries.
I recently had the opportunity to participate in an important event co-hosted by Egypt and Zambia on the sidelines of the UN General Assembly meeting in New York. Attended by foreign ministers and representatives of the Global South countries, the event aimed to lay the groundwork for implementing the Seville recommendation for the establishment of a Borrowers Club.
The participants stressed the growing need for this institution, the idea for which dates back over 40 years. In 1984, the Latin American countries attempted to establish such a club in Cartagena, Colombia, only to be thwarted by political pressures by the creditor countries.
Subsequent attempts occurred in the wake of successive international debt crises, but they met with no success, failing to muster the support needed to prioritise debt management and crisis solutions.
As a result, the global financial system has remained skewed in favour of creditors. Debtors have remained fragmented and poorly coordinated, their efforts dissipated through various international forums and organisations, while they have been left with little technical support and limited knowledge-exchange among the Global South countries.
Today, however, the trend towards strengthening the collective voice of the Global South in response to the debt crisis is gathering fresh momentum. It is fed by the growing awareness of the need to coordinate strategies, build negotiating leverage against creditors, and marshal facts to defeat common misperceptions regarding their creditworthiness.
In this regard, recent reports in the Global Debt Database on emerging markets and developing economy (EMDE) risks reveal that cases of default are fewer than commonly assumed. Even though these reports were compiled by a working group of 26 international financial institutions and were based on data stretching back to the mid-1990s, they have done little to reduce financing costs.
The proposed Borrowers Club is expected to make better use of such findings, as it strives to set priorities for the international agenda and lend its weight to efforts to create a fairer balance between creditors and debtors.
The coming weeks are expected to bring progress in the formulation of a practical roadmap towards the establishment of the Borrowers Club. This will involve defining its objectives, functions, implementation methods, membership criteria and tiers, the procedure for choosing its headquarters, governance rules, decision-making processes, and financing sources and mechanisms.
A clear definition of the role of its technical secretariat will also be crucial, as this body will be central to the club’s chances of success.
This article also appears in Arabic in Wednesday’s edition of Asharq Al-Awsat.
* A version of this article appears in print in the 25 September, 2025 edition of Al-Ahram Weekly
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