By Benadeta Mwaura - Reporter
Kenya, June 20 , 2026 - Developing countries are spending an increasing share of their public resources on debt repayments, undermining investments in healthcare, education, infrastructure, and social protection, according to new findings from the United Nations.
A report by the United Nations Conference on Trade and Development (UNCTAD) shows that rising borrowing costs have reduced fiscal space in 99 developing countries between 2018 and 2024, affecting nations home to approximately 5.5 billion people.
The findings underscore growing concerns that debt servicing obligations are increasingly crowding out critical development spending at a time when many low- and middle-income countries are grappling with climate shocks, geopolitical tensions, and slowing economic growth.
According to UNCTAD, nearly three-quarters of developing economies saw the share of government revenue available for development shrink as interest payments rose over the six-year period. The agency warned that governments are being forced to make difficult trade-offs between servicing debt and funding essential public services.
"Developing countries must not be forced to choose between servicing their debt or serving their people," UNCTAD said in its latest analysis.
The report highlights how external borrowing conditions remain challenging despite some easing in global financial markets. Average sovereign bond yields for developing countries rose from around 5% before the COVID-19 pandemic to 6.8% between 2022 and 2024, before moderating to 5.7% in 2025. However, borrowing costs remain significantly higher than those faced by advanced economies.
UNCTAD estimates that developing countries paid a record $921 billion in net interest on public debt in 2024, a 10% increase from the previous year. A record 61 developing economies allocated at least 10% of government revenues to interest payments, limiting their ability to finance health, education, and climate adaptation programmes.
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The debt burden has become particularly acute for countries reliant on external financing. Developing nations borrowed internationally at rates two to four times higher than the United States and up to 12 times higher than some advanced European economies in recent years.
UNCTAD further noted that average maturities for sovereign bonds in developing economies have fallen sharply, increasing refinancing risks and exposing governments to more frequent borrowing cycles. Average bond maturities dropped from approximately 17 years before 2021 to 9.5 years in 2025.
The agency warned that persistently high debt service costs are contributing to a negative resource transfer from developing economies, where countries are paying more to external creditors than they receive in new financing. In 2024, developing countries recorded a net outflow of $25 billion.
The warning comes as global economic uncertainty intensifies. The Group of Seven this week pledged to strengthen efforts to address debt vulnerabilities affecting developing and middle-income countries, while calling for reforms to the international financial architecture.
UNCTAD is urging governments and international financial institutions to accelerate reforms aimed at lowering borrowing costs, expanding access to concessional financing, and establishing more effective debt restructuring mechanisms.
The agency argues that without urgent action, mounting debt pressures could derail progress towards achieving sustainable development goals across much of the developing world.