LAHORE: Rising public debt costs are placing increasing pressure on the ability of developing countries to finance essential public services, with billions of people living in economies where interest payments exceed government spending on health or education, according to the United Nations Conference on Trade and Development (UNCTAD).
In its latest reporting on global debt, UNCTAD said approximately 3.7 billion people live in countries where public debt interest payments are higher than spending on health or education. Developing countries paid nearly $1 trillion in net interest on public debt in 2025, almost three times the level recorded in 2010.
The figures highlight the growing challenge facing governments seeking to maintain essential services while meeting debt obligations amid economic uncertainty, elevated borrowing costs and competing development priorities.
Debt Burdens Threaten Development PrioritiesHigh debt-servicing costs can leave governments with fewer resources for hospitals, schools, infrastructure, social protection and programmes aimed at reducing poverty.
Developing economies also face differing borrowing conditions in international financial markets. Countries with limited fiscal space can struggle to obtain affordable financing, particularly when global interest rates, energy prices and geopolitical uncertainty place additional pressure on public budgets.
UNCTAD has called for international cooperation to address structural inequalities in borrowing costs and strengthen the ability of developing countries to manage their debt.
The agency has also highlighted the potential benefits of narrowing the borrowing-cost gap between developing and advanced economies, estimating that doing so could save developing countries around $500 billion annually in interest payments.Implications for Developing Economies For developing countries, the challenge extends beyond the size of public debt.
The cost of servicing that debt can influence how much funding remains available for public services and long-term investment.
Governments must balance debt sustainability with the need to support economic growth, create employment and protect vulnerable populations. International financial institutions and development partners also face pressure to improve access to affordable financing.
The issue is particularly important for countries seeking to expand education, healthcare and climate resilience while managing limited public resources.
UNCTAD has identified stronger cooperation among borrowing countries, including through the Borrowers’ Platform, as one avenue for addressing shared debt-related challenges and strengthening their collective voice in international financial discussions.
However, sustainable solutions will also depend on national economic policies, responsible borrowing, improved revenue mobilisation and cooperation among governments, creditors and international institutions.
The latest figures underline the importance of treating public debt not only as a financial issue but also as a development challenge with direct consequences for people’s access to essential services.
Reported By: Mirza Maqbool Baig I Guider News
