UNCTAD: Global interest bills near $1trn as borrowing costs rise

Developing countries, including Nigeria, paid almost $1 trillion in net interest on public debt in 2025, nearly three times the amount recorded in 2010, as rising borrowing costs increasingly crowd out spending on health, education and other development priorities, the United Nations Conference on Trade and Development (UNCTAD) has warned.

In its latest “A World of Debt 2026 report”, UNCTAD said interest payments on public debt in developing economies rose from $363 billion in 2010 to $995 billion in 2025.

The UN trade body warned that the cost of servicing debt has become a major constraint on public investment, particularly in countries with limited fiscal space.

Furthermore, the report revealed that in 51 developing countries, home to 3.7 billion people, interest payments on public debt now exceed government spending on either health or education.

UNCTAD said the development underscores how high financing costs are diverting resources that could otherwise be deployed to schools, hospitals, roads, clean energy and nutrition.

The report said, “Global public debt reached $111 trillion in 2025, up from $49 trillion in 2010”.

Although developed economies account for more than two-thirds of the total debt stock, UNCTAD noted that debt has grown much faster in developing countries, where borrowing conditions remain structurally more expensive.

“Developing countries paid an average interest rate of 5.2 per cent on public debt in 2025, compared with 2.2 per cent paid by developed economies”, UNCTAD said this while adding that persistent gap means poorer countries spend a larger share of scarce public resources on interest payments rather than productive investment.

As a result, many governments have turned increasingly to domestic markets to finance budget deficits. However, domestic borrowing often carries higher interest rates, further increasing debt-service obligations and limiting the fiscal space available for essential services.

UNCTAD estimated that narrowing the borrowing-cost gap between developing and developed economies could save developing countries about $500 billion annually in interest payments. It said such savings could finance about 1.3 million primary healthcare centres or provide a minimum-diversity diet for approximately 1.6 billion children every year.

For Nigeria, the warning is particularly significant. Debt servicing remains one of the largest items in the federal budget, consuming a substantial share of government revenue and leaving limited resources for capital expenditure, healthcare, education and social investment.

Experts have repeatedly warned that high domestic interest rates, weak revenue generation and currency pressures have combined to worsen the country’s debt-service burden.

At the global level, UNCTAD called for urgent action to reverse declines in official development assistance, expand lending by multilateral and regional development banks, and strengthen technical assistance to developing countries.

It also urged national governments to improve macroeconomic management, strengthen public institutions, restructure debt portfolios and adopt innovative financing instruments.