Interest payments on low-income country debt have doubled, G20 warns as burden deepens

Leaders of the G20 countries have warned that low-income countries are being pushed to the brink by rapidly rising interest payments on external public debt, highlighting a worsening financial squeeze that is undermining development and widening inequality across the global South.

According to the Leaders' Declaration adopted at the G20 Summit in Johannesburg on Saturday, interest payments on total external public debt for low-income countries have more than doubled over the past decade, creating a severe drain on government budgets.

For many African nations, these costs now exceed spending on essential services such as healthcare, education, and infrastructure—further weakening their ability to reduce poverty and build economic resilience.

Africa faces growing financing pressures as rising debt service costs severely constrain development. By the end of 2024, public debt to countries and multilateral financial institutions had reached $1.815 trillion, while annual debt servicing climbed to $163 billion, leaving 57% of Africans living in countries where debt payments exceed health or education spending. 

The G20 stated that high interest costs have become one of the most significant obstacles to inclusive growth, choking fiscal space and forcing governments to divert scarce resources toward debt service instead of long-term development needs.

The surge in payments comes as vulnerable economies face elevated borrowing costs, large refinancing pressures, and an outflow of private capital, intensifying their fragility.

"The situation is particularly challenging for many low-income countries, especially those in Africa. We note with concern that interest payments on total external public debt have increased significantly and have more than doubled over the past decade for low-income countries," read the declaration. 

"We reaffirm our commitment to support efforts by low- and middle-income countries to address debt vulnerabilities in an effective, comprehensive and systematic manner." 

Although the G20 noted that the risk of a systemic global debt crisis remains contained, it emphasised that the situation for low-income countries—especially in Africa—has reached a critical point. With rising interest expenses eroding fiscal capacity, many governments are unable to invest in disaster resilience, public services, or climate adaptation programmes.

"We note the voluntary use of crisis-resilient debt clauses where appropriate, which can provide vital breathing space and liquidity," they said.

"We note the efforts to explore the consideration of the use of liability management operations and debt-for-development, debt-for-climate, or similar swaps on a voluntary and case-by-case basis, with a balanced view on their benefits and limitations to help strengthen debt sustainability." 

In response, G20 leaders reaffirmed their commitment to supporting low- and middle-income nations in addressing mounting debt vulnerabilities. They endorsed the G20 Ministerial Declaration on Debt Sustainability, adopted in October 2025, which outlines concrete measures to strengthen debt management and promote fairer, more sustainable lending practices.

The G20 also called for predictable and timely implementation of the Common Framework for debt treatments, beyond the earlier Debt Service Suspension Initiative (DSSI), and urged all creditors—including private sector lenders—to improve transparency around lending terms.

To help countries better assess and manage debt risks, the bloc backed the ongoing review of the IMF–World Bank Debt Sustainability Framework (DSF) for low-income countries, expected to improve the methodologies used to analyse debt distress.

The framework requires regular debt sustainability analyses of a country’s projected debt burden over the next 10 years and its vulnerability to economic and policy shocks. Countries vary in their ability to handle debt. The DSF classifies countries’ debt-carrying capacity into three categories – strong, medium, and weak.

Thresholds corresponding to strong performers are highest, indicating that countries with good macroeconomic performance and policies can generally handle greater debt accumulation.

Meanwhile, the G20 Leaders highlighted the potential of crisis-resilient debt clauses, liability-management operations, and voluntary debt-for-development or debt-for-climate swaps to provide breathing room, though they cautioned that these tools must be approached with a balanced view of their benefits and limitations.

The G20 said it would continue engaging through platforms such as the Global Sovereign Debt Roundtable, ensuring borrower countries have a stronger voice in negotiations. It also urged global institutions to support vulnerable nations facing liquidity pressures despite having sustainable long-term debt profiles.

With interest costs rising faster than government revenues, the G20 stressed that coordinated international action is urgently needed to shield low-income countries from a deepening debt trap—and to enable them to reclaim fiscal space for development.

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