The U.S. national debt has passed $40 trillion. The cost of servicing it now exceeds federal spending on national defense or health care for millions of citizens. That's the stark arithmetic behind a week of warnings at International Monetary Fund and World Bank Group meetings in Bangkok, where debt, energy prices and climate shocks dominated the agenda.
The debt stood at $36.2 trillion when President Trump began his second term in January 2025, according to The Hill opinion contributor John Mac Ghlionn. Since then, it has climbed by nearly $4 trillion. Mac Ghlionn argued that borrowing costs and the debt load could squeeze public services, infrastructure, disaster response and medical research. He also warned that creating money to meet obligations could erode the dollar's purchasing power and feed higher prices.
The Cost of the Iran War
Mac Ghlionn described the protracted war with Iran as draining tens of billions of dollars from the treasury. TIME reported that the conflict has pushed up fuel prices and contributed to inflation, as public debt soars and the IMF warns that it is unsustainable.
The same piece also raised the Trump family's finances. It said the president had increased his personal net worth by $2.2 billion during his second term and that his sons had joined investment firms. Those claims come from an opinion writer, not a news report, and sit apart from the central fiscal question: what the government owes and what it costs to carry that debt.
Subsidies Under Strain
Governments worldwide have answered the fuel price spike with price controls and handouts. An International Energy Agency survey cited by a United Nations Development Programme report identified 95 countries with fuel-price support policies, including subsidies and fuel-tax cuts. The UNDP said explicit fuel subsidies could top $1 trillion globally this year. Its verdict was blunt: it's unsustainable.
The UNDP described a "triple shock": high borrowing costs, the energy price spike and extreme weather driven by this year's El Niño, which the report said was on course to set records.
Some import-dependent countries are pursuing longer-term fixes through renewable energy, efficiency and electrification, including subsidies for electric buses and lower tariffs on solar panels. But high debt and interest rates, along with climate shocks, make it harder for some governments to finance infrastructure that would cut their exposure to fossil-fuel price swings. TIME added that debt also makes investment in AI infrastructure harder, and that AI's energy appetite may tie a country's readiness to the non-fossil share of its power supply.
Developing Countries Squeezed
A Fortune commentary by Masood Ahmed and Mary Svenstrup of the Center for Global Development, and Christina Segal-Knowles of The Rockefeller Foundation, laid out the scale of the burden. More than half of developing countries face liquidity and financing challenges. The average developing country spends more than 10% of its revenue on debt interest, nearly double the burden a decade ago. In 10 countries, interest payments exceed the entire public investment budget.
The human toll shows in income data. Real per capita incomes in Sub-Saharan Africa rose about a fifth in the decade to 2015 but haven't grown in the decade since.
The authors said low-cost external borrowing from the Covid era is coming due just as global borrowing costs have risen and affordable financing has dried up. The IMF and multilateral development banks helped countries avoid widespread default, they wrote, but didn't provide enough to restore growth or resilience. G20 creditors keep withdrawing money, and much of the new multilateral funding flows straight back to repay creditors. China has shifted from a net provider of finance to a net extractor over the past decade, the authors said. A record share of poor countries net-repaid the IMF in 2026, a drain they expect 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 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."
A Growth-First Answer
The Fortune authors argued that most countries facing these pressures don't have debt stocks requiring imminent restructuring. Instead, they called for a coordinated growth and investment effort, pointing to a Rockefeller Foundation proposal called the Growth and Investment Reset. Existing resources at international financial institutions and newer financing mechanisms, they said, could make it relatively inexpensive for donors. They cited President Mahama of Ghana as among the leaders building a model of country-led growth supported by domestic resources and private investment.
Why This Matters:
When interest payments outrun defense and health spending, debt stops being an abstraction. It starts crowding out core functions of government. The same pattern is playing out abroad: roughly 10% of revenue in the average developing country goes to interest, and 10 countries spend more on interest than on public investment. Subsidies exceeding $1 trillion, which the UNDP itself calls unsustainable, show the cost of papering over price shocks with public money. The reform path highlighted in the Fortune piece leans on domestic resources and private investment rather than ever-larger bailouts. For American taxpayers and investors, the lesson is plain: debt service competes with everything else a government wants to do, and the room to maneuver shrinks with every added trillion.
- national debt
- developing countries
- debt crisis
- international monetary fund
- world bank group
- debt service
- climate change
- iran war