This UN Debt Initiative Is Different

Mahmoud Mohieldin, Paolo Gentiloni, Trevor Manuel, Yan Wang

WASHINGTON, DC/ROME/JOHANNESBURG/BOSTON – Economic development requires financing that is affordable, accessible, and has maturities matched to development outcomes. Yet, for most developing countries, none of the above apply. Instead, an escalating “debt disaster” is unfolding across much of the developing world, exacerbated by a series of cascading global crises.

The urgency of the current crisis cannot be overstated. Over half of the 68 countries eligible for the International Monetary Fund’s Poverty Reduction and Growth Trust (PRGT) are now facing debt distress – more than double the number in 2015.

But even this figure fails to capture the scale of the problem, as many countries outside the PRGT framework are also grappling with crippling debt burdens and liquidity challenges. Between 2017 and 2023, developing countries’ average debt-service costs surged by nearly 12% per year – more than double the growth rate of their exports and remittance earnings. Consequently, external debt sustainability deteriorated in two-thirds of developing countries over this period, including in 37 of 45 African countries with available data.

Despite their unsustainable debt burdens, many countries are reluctant to default, owing to inefficient debt-resolution mechanisms and prohibitively high political and economic costs. As a result, indebted countries prioritize their creditor obligations over their own development, as ballooning debt-service payments crowd out vital investments in infrastructure and human capital, stifling growth and delaying climate action. Today, 3.3 billion people live in countries that spend more on debt servicing than health care and education, the vast majority of them in middle-income economies.

If left unaddressed, current liquidity constraints could quickly morph into a full-blown solvency crisis. Urgent intervention is therefore needed to avert a wave of defaults and put indebted countries on the path to economic independence.

In response to the escalating debt crisis in the Global South, United Nations Secretary-General António Guterres established the Expert Group on Debt in December 2024. Its members are tasked with identifying and advancing policy solutions to help developing economies – particularly African countries and small island developing states – break free from the vicious cycle of debt distress.

Although previous UN working groups have tackled sovereign debt issues, several factors set this initiative apart. The first is timing: successive economic shocks have forced developing countries to borrow, typically at high interest rates, severely restricting their fiscal space. With just five years left until the 2030 deadline for achieving the Sustainable Development Goals (SDGs), developing countries – impeded by a persistent $4 trillion annual financing gap – are on track to meet less than one-fifth of the SDG targets.

Second, while previous initiatives focused on developing countries’ ability to repay and service their debts, the Expert Group aims to ensure that any proposed solutions support sustainable development.

Third, the Expert Group aims to identify and promote solutions that can gain political and public support at the global, regional, and national levels. While bold and ambitious measures are essential to addressing the current debt and development crisis, we cannot afford to pursue proposals that stand little chance of achieving the support required to drive meaningful change.

With this in mind, the Expert Group seeks to develop comprehensive strategies. If solutions apply only to new debt or fail to foster economic growth, stabilizing debt dynamics could take years. Trade-offs must also be carefully considered; increased reliance on guarantees, for example, might mobilize more private capital but could reduce access to concessional financing and grants for sovereigns.

Lastly, the Expert Group’s composition and outreach make it uniquely positioned to address these issues. Supported by UN Trade and Development (UNCTAD) and other international bodies, the Group brings together former and current officials, policymakers, and leading academics, combining technical expertise with high-level influence.

The Group’s strong ties to key institutions and networks – including international financial institutions, the G20, Jubilee 2025, and various regional and national organizations and agencies – create valuable opportunities to engage policymakers, scholars, civil-society representatives, and other stakeholders. By fostering coordination among UN member states, the Group can help mobilize political will and refine emerging proposals.

Three upcoming gatherings, in particular – July’s Fourth International Financing for Development Conference in Spain, the G20 Summit in South Africa, and November’s UN Climate Change Conference (COP30) in Brazil – could serve as critical platforms to promote realistic and practical policy solutions.

To be sure, no single reform will resolve the developing world’s debt crisis overnight. But the crisis has laid bare the limitations of conventional approaches, underscoring the urgent need to rethink the structure and purpose of sovereign debt so that countries are no longer forced to choose between repaying their creditors and securing their future.

Given the stakes, any solution must be both swift and capable of uniting a broad coalition of stakeholders. But speed cannot come at the expense of long-term progress. To break the cycle of debt distress, solutions must go beyond short-term fixes and serve as a foundation for sustainable development.

Mahmoud Mohieldin, UN Special Envoy on Financing the 2030 Sustainable Development Agenda, is Co-Chair of the Expert Group on Debt. Paolo Gentiloni, former European Commissioner for Economy, is Co-Chair of the Expert Group on Debt. Trevor Manuel is a former minister of finance of South Africa and Co-Chair of the Expert Group on Debt. Yan Wang, a former senior economist at the World Bank, is Senior Academic Researcher at the Boston University Global Development Policy Center and Co-Chair of the Expert Group on Debt.