Over the weekend, heads of state from the world’s most powerful nations gathered in Johannesburg, South Africa, for a summit that had been touted as a turning point for addressing global debt issues under the auspices of the G20.
President of South Africa Cyril Ramaphosa had consistently stated that the issue was at the center of his agenda, arguing that governments, especially in Africa, have little room to fund essential services like healthcare and education due to rising interest rates in debt.
Recommended Stories
list of 4 itemsend of list
However, South Africa did not make any additional recommendations for easing fiscal restraints in indebted countries despite repeated pledges, including those made in the leaders’ summit declaration to “strengthen the implementation of the G20 Common Framework.”
As a result of Washington’s retreat from multilateralism, hopes that world leaders would use the G20 summit to address sovereign debt issues were further squandered when South Africa and US President Donald Trump retreated from the summit.
Following presidencies held by Indonesia in 2022, India in 2023, and Brazil in 2024, the summit also marked the end of a brief period of Global South leadership in the G20. On December 1, the US will assume the presidency of the G20.
Debt “vulnerabilities”
The G20, which consists of 19 developed and emerging economies, the European Union, and the African Union, accounts for roughly two-thirds of the world’s population and contributes to 85 percent of GDP.
A consensus statement on debt was agreed upon by G20 finance ministers and central bank chiefs in Washington in October.
In many developing economies, the high level of debt is one of the barriers to inclusive growth, which prevents them from investing in infrastructure, disaster recovery, healthcare, education, and other development needs, the statement said.
Additionally, it pledged to “reaffirm our commitment to support efforts by low- and middle-income countries to address debt vulnerabilities in an effective, comprehensive, and systematic manner.”
The G20’s highly critical Common Framework, a framework that was introduced five years ago to accede and simplify debt restructuring, was being improved by the communique.
In addition, the statement advocated for more regional development bank lending and greater transparency regarding debt reporting.
record-breaking debt
Total debt in developing nations has reached a record high of $ 109 trillion by the middle of 2025, according to the Institute of International Finance, a branch of the banking industry.
Many developing nations have relied on debt to stabilize their economies, outpacing other investments in recent years due to COVID-19, climate shocks, and rising food prices. For instance, according to a recent UN report, more than 40% of African governments use debt servicing more than healthcare.
Additionally, Africa is plagued by high borrowing costs. In Latin America and the Caribbean, bond yields, which are the interest on government debt, were on average 6.8% and 9.8% in Africa in 2023.
To achieve the Paris Agreement goals, Africa collectively needs $143 billion in climate finance each year. In 2022, it received approximately $44bn.
In 2024, countries on the continent served their external debt for almost $90 billion at the same time.
No improvement
165 organizations urged President Ramaphosa to implement reforms before transferring the G20 presidency to the US in December and condemned the group’s slow progress on debt sustainability shortly before the release of its final statement.
There is no evidence that, during the South African presidency, any progress has been made in addressing the debt crisis facing Africa and many other countries around the world, despite the fact that the G20 has been designated as an “Africa G20” this year, according to the group’s letter.
The International Monetary Fund (IMF) was instructed to sell its gold reserves and establish a debt relief fund for troubled governments in the missive. Additionally, it supported the establishment of a “borrowers club” to promote cooperation between low-income nations.
The demand for a unified debtor body is a result of growing frustration with the frameworks currently in place, most notably the Paris Club, which has allowed mostly Western governments to influence their own repayment practices.
To aid developing nations in coping with the COVID-19 crisis, the G20 established a multibillion-dollar repayment pause in May 2020. The program, known as the Debt Service Suspension Initiative, is still helping some participating nations.
Soon after the Common Framework was launched, it was intended to coordinate all creditors’ debt relief. The Paris Club, China, and private creditors were involved in the initiative at the time, which helped stop developing nations from experiencing a full-fledged debt crisis.
However, the coordination of equal treatment between government lenders, commercial banks, and bondholders has caused delays and setbacks.
Ethiopia, Zambia, Ghana, and Chad are the only nations that have yet to have completed their debt restructuring agreements.
According to ONE Campaign, an advocacy group, the program has only slashed the four participating countries’ debt by just 7% even then.
‘Outmanoeuvred’
A former finance minister and a former Kenyan central banker convened an expert panel in South Africa in March to discuss ways to assist heavily indebted low-income nations, particularly in Africa.
The panel echoed many of the ideas put forth by the 165 charities that wrote to Ramaphosa in October, calling for initiatives like the creation of a debtors’ club and an IMF-backed special debt fund.
However, the leaders’ summit’s experts’ proposals weren’t even acknowledged, according to Kevin Gallagher, director of Boston University’s Global Development Policy Center. He claimed that the G20 presidency “did not address the magnitude of the global debt problem.”
In the end, Gallagher added, “South Africa was outmanoeuvred by larger, more economically significant G20 members who saw little benefit in themselves in reforming the international financial system on debt.”
Double whammy of debt
More than $75 billion in debt, or roughly 40% of all external debt, was cancelled by the IMF, World Bank, and some Paris Club creditors in the Heavily Indebted Poor Countries Initiative in the early 2000s.
However, many developing nations have since retreated to the black. Private creditors continued to invest in low-income countries after the financial crisis of 2008, steadily replacing the less expensive loans that were once provided by organizations like the World Bank.
Nearly 40% of lower-income nations’ external public debt repayments went to commercial lenders between 2020 and 2025. According to Debt Justice, a charity based in the United Kingdom, only one-third of those funds went to multilateral organizations.
China has also grown to be the largest single creditor in the world, especially in the Global South, dedicating more than $472 billion to its policy banks between 2008 and 2024, including the China Development Bank and the Export-Import Bank.
There are now a wider range of lenders that developing nations have turned to, according to Iolanda Fresnillo, a policy and advocacy manager at Eurodad, a civil society organization.
“It’s been a double whammy,” he said. She cited the difficulty of coordinating creditors during a restructuring as being more expensive and difficult to resolve. By stifling public investment, prolonged debt crises stifle growth.
When creditors pursue competing commercial interests, it becomes more difficult to overcome these obstacles. An independent, negotiation-sped up debt-restructuring body, according to Fresnillo, could be a boon.
Rebeca Grynspan, the head of the UN Conference on Trade and Development (UNCTAD), stated in September that “there is no permanent institution or system that is always dealing with debt restructuring. Maybe we can create new momentum.”
However, there is no new information about an international mechanism to reduce sovereign debt. In the late 1990s, the IMF spearheaded a push for a neutral body that resembled a US bankruptcy court.
The Fund’s proposed restructuring plan received swift opposition. The US and other major creditor nations objected to giving power to an international body that might undermine the US’s legal system and weaken investor protections.
Fresnillo points out that “the need for this kind of international solution is obvious.” A bare minimum should be required in order to solve every new debt crisis, as opposed to an impromptu negotiation.
