Debt Burdens Leave Poor Nations Less Room to Govern

The U.S. national debt recently passed $40 trillion, while more than half of developing countries face liquidity and financing challenges that limit spending on investment and essential services. At meetings of the International Monetary Fund and World Bank Group in Bangkok, officials and analysts discussed debt pressures alongside the economic effects of the war in Iran, artificial intelligence and climate-related shocks.

Debt and the cost of borrowing

A Fortune commentary by Masood Ahmed, President Emeritus, Center for Global Development; Mary Svenstrup, Non-Resident Fellow, Center for Global Development; and Christina Segal-Knowles, Managing Director, International Policy, The Rockefeller Foundation, said the average developing country now spends more than 10% of its revenue on debt interest. They described that as nearly double the burden a decade ago. In 10 countries, interest payments exceeded the entire public investment budget.

The authors said low-cost external borrowing from the Covid era was coming due just as global borrowing costs rose and affordable financing sources evaporated. The IMF and multilateral development banks helped countries avoid widespread default, they wrote, but didn't provide enough funding to restore growth or resilience. G20 creditors continued to withdraw money, while much of the new multilateral funding went back to repay creditors.

China, the Fortune authors said, had shifted from a net provider of finance to a net extractor over the past decade. A record share of poor countries net-repaid the IMF in 2026, and the authors said that drain was set to widen by 2030. Without action, around 40 of the world’s poorest countries could face a choice: cut spending at significant cost to growth and human lives, or finance deficits and debt rollovers through expensive private borrowing that could lead to default.

IMF Managing Director Kristalina Georgieva told G20 finance ministers that “high refinancing needs and rising debt-service costs are constraining many developing economies... limiting their capacity to finance critical spending on infrastructure, health, and education, which undermines growth and, in turn, debt sustainability.”

Public costs and competing pressures

The Hill opinion contributor John Mac Ghlionn said U.S. debt stood at $36.2 trillion when President Trump took office for his second term in January 2025, and had since risen by nearly $4 trillion. The article said interest payments on past borrowing now exceed federal spending on national defense or health care for millions of citizens. It argued that borrowing costs and debt could squeeze public services, infrastructure, disaster response and medical research, while money creation to meet obligations could reduce the dollar’s purchasing power and contribute to higher prices.

The article also said Trump increased his personal net worth by $2.2 billion during his second term; his elder sons, Eric and Donald Jr., joined investment firms; and twenty-year-old Barron Trump reportedly accumulated a $150 million cryptocurrency fortune. It described the protracted war with Iran as draining tens of billions of dollars from the treasury. TIME reported that the war had raised fuel prices and contributed to inflation, while the IMF warned that soaring public debt was unsustainable.

Energy, climate and investment

A United Nations Development Programme report issued alongside the meetings described a “triple shock”: high borrowing costs, an energy-price spike and extreme weather events driven by this year’s El Niño, which the report said was on course to set records. An International Energy Agency survey cited by the report identified 95 countries with fuel-price support policies, including subsidies or fuel-tax reductions. Explicit fuel subsidies could exceed $1 trillion globally this year, according to the UNDP, which said the approach was unsustainable.

Some countries, particularly those dependent on imports, were making longer-term changes through renewable energy, energy efficiency and electrification, including subsidies for electric buses and lower tariffs on solar panels. High debt and interest rates, along with El Niño and broader climate shocks, made it harder for some countries to finance infrastructure that could reduce exposure to fossil-fuel price swings. Debt also made investment in AI infrastructure harder. Countries’ preparedness for AI may increasingly intersect with the non-fossil share of their energy supply because of AI’s energy needs.

The Fortune authors said most countries facing financing and liquidity challenges didn't have debt stocks requiring imminent restructuring. They called for a coordinated growth and investment effort, citing the Rockefeller Foundation’s policy proposal for a Growth and Investment Reset and saying existing resources at international financial institutions and newer financing mechanisms could make it relatively inexpensive for donors. They also cited President Mahama of Ghana among leaders building a model of country-led growth supported by domestic resources and private investment.