From Debt to Development

The document examines the escalating sovereign debt crisis in developing countries, noting that debt has reached 55 percent of GDP and that interest payments often exceed spending on health, education, and climate action combined. It attributes these vulnerabilities to structural factors like weak domestic economies and systemic issues such as high risk premiums and the lack of a dedicated sovereign debt agency. To address this, the brief proposes reforms in four areas: short-term debt relief, prevention of debt accumulation, responsible lending, and domestic fiscal consolidation.

• Sovereign debt in developing countries has reached 55 percent of GDP, a trend that predates the COVID-19 pandemic, with the debt-to-GDP ratio increasing by 13 percentage points between 2010 and 2019.
• The rising cost of debt servicing, driven by a shift toward non-concessional private creditors and non-Paris Club official creditors, has led many developing nations to spend more on interest payments than on the combined costs of climate action, education, and health.
• Debt vulnerabilities are caused by structural factors, such as the absence of deep domestic capital markets leading to exchange rate risks, and systemic factors, including poor credit ratings resulting in higher risk premiums and the lack of a dedicated agency for sovereign debt.

APA

Matola, J. (2025). From Debt to Development. South African Institute of International Affairs. https://saiia.org.za/research/from-debt-to-development/

Chicago

Matola, Joseph. From Debt to Development. South African Institute of International Affairs, 2025. https://saiia.org.za/research/from-debt-to-development/.

Wikipedia

{{cite report |last1=Matola |first1=Joseph |title=From Debt to Development |publisher=South African Institute of International Affairs |date=20 May 2025 |url=https://saiia.org.za/research/from-debt-to-development/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{matola2025from, author = {Matola, Joseph}, title = {{From Debt to Development}}, institution = {South African Institute of International Affairs}, year = {2025}, month = may, url = {https://saiia.org.za/research/from-debt-to-development/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }