From Debt to Development

This policy brief examines the rising sovereign debt crisis in developing countries, noting that debt levels reached 55 percent of GDP following the COVID-19 pandemic. It argues that debt servicing costs now exceed spending on health, education, and climate action combined, driven by structural weaknesses and a shift toward non-concessional and non-Paris Club creditors. The document proposes four reform areas: short-term debt relief, prevention of debt accumulation, responsible lending, and domestic fiscal consolidation.

• Sovereign debt in developing countries reached 55 percent of GDP following the COVID-19 pandemic, though the increase began earlier, with the debt-to-GDP ratio rising by 13 percentage points between 2010 and 2019.
• The burden of debt servicing has increased significantly, leading many developing countries to spend more on interest payments than on the combined costs of climate action, education, and health. This rise is attributed to a shift in debt composition toward non-concessional private creditors and non-Paris Club official creditors.
• Debt vulnerabilities are caused by structural factors, such as weak domestic economies and a lack of deep domestic capital markets that force overseas borrowing and create exchange rate risks, as well as systemic issues like poor credit ratings leading to higher risk premiums and the lack of a dedicated agency for sovereign debt matters.

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} }