Debt tsunami threatens Global South

The Express Tribune argues that the next debt strain on developing nations may arrive quietly, through costly refinancing and delayed projects, rather than through a sudden market breakdown. IMF Managing Director Kristalina Georgieva made a similar point after a G20 finance ministers' meeting, saying higher advanced-economy bond yields push borrowing costs up worldwide. Countries with stronger fiscal credibility can therefore end up paying more without any change in their own policies.

World Bank data cited in the article show developing economies in the low- and middle-income group recorded external interest bills of $415.4 billion in 2024, a 2.2% increase on 2023. Between 2022 and 2024 these countries sent out roughly $741 billion more in principal and interest than they received in fresh loans, which the World Bank describes as the biggest shortfall of this kind in five decades or more. In low-income countries, interest makes up over half of all payments due on foreign borrowing.

The article ties these pressures to structural forces such as heavy borrowing, defence spending, the energy transition and AI-driven data-centre investment, which keep long-term yields high even as policy rates fall. According to the World Bank, the average rate developing economies paid on new public debt in 2024 hit a 24-year high. The writer concludes that domestic reform alone cannot neutralise shifts in worldwide capital costs.