Debt Payments Drain Poor Nations as Creditors Collect

Developing countries now spend more public revenue on debt interest as creditors withdraw funds, leaving governments with less room to invest in health, education and infrastructure. More than half face liquidity and financing challenges, according to a Fortune commentary by Masood Ahmed, Mary Svenstrup and Christina Segal-Knowles. The U.S. national debt has also passed $40 trillion, and the IMF has warned that soaring public debt is unsustainable.

Who collects the payments

The Fortune authors said the average developing country now 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. A record share of poor countries net-repaid the IMF in 2026, and the authors said that drain will widen by 2030.

Covid-era low-cost external borrowing is coming due as global borrowing costs rise and affordable financing sources disappear, the authors wrote. The IMF and multilateral development banks helped countries avoid widespread default, but that funding hasn't restored growth or resilience. G20 creditors continued to withdraw money, while much of the new multilateral funding went back to repay creditors. China, the authors said, shifted from a net provider of finance to a net extractor over the past decade.

The consequences include a prolonged income squeeze. Real per capita incomes in Sub-Saharan Africa rose about a fifth in the decade to 2015, the authors said, but didn't grow in the decade since. Without action, around 40 of the world's poorest countries could face a stark choice: cut spending at significant cost to growth and human lives, or use expensive private borrowing to finance deficits and debt rollovers, risking default.

Public budgets under pressure

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.”

The United Nations Development Programme described a “triple shock” facing countries: 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 found 95 countries had fuel-price support policies, including subsidies or fuel-tax reductions. Explicit fuel subsidies could exceed $1 trillion globally this year, the UNDP said, and described that approach as unsustainable.

Countries reliant on imports are also making longer-term changes, including renewable energy, energy efficiency and electrification. Measures cited include subsidies for electric buses and lower tariffs on solar panels. High debt and interest rates, along with El Niño and broader climate shocks, make it harder for some countries to finance infrastructure that could reduce exposure to fossil-fuel price swings. Debt also makes investment in AI infrastructure harder, TIME reported; countries' preparedness for AI may increasingly intersect with the non-fossil share of their energy supply because AI requires energy.

Proposals and competing claims

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

In the United States, The Hill opinion contributor John Mac Ghlionn said the national 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. Interest payments on past borrowing now exceed federal spending on national defense or health care for millions of citizens, the article said. It warned that borrowing costs and debt could squeeze public services, infrastructure, disaster response and medical research. The article also reported that 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. TIME reported that the protracted war with Iran was raising fuel prices and contributing to inflation, while draining tens of billions of dollars from the treasury.