The debt vulnerabilities of many developing economies are a “major barrier” to inclusive growth, the chair of the Group of 24 nations said on Tuesday, warning their governments were increasingly contending with mounting debt burdens.
Speaking to reporters at the annual meetings of the International Monetary Fund and World Bank in Bangkok, Taiwo Oyedele said estimates showed developing nations were paying roughly $500 billion more for their debt than developed countries, as economies grapple with growing fiscal deficits.
“What we have seen by members of the G24 and across particularly the developing countries such as those in Africa, is an increasing body of not just high debts, but high costs of debts,” said Oyedele, who is also Nigeria’s minister of finance and coordinating minister of the economy.
READ: G20 warns of rising debt pressures on low-income countries
Heavily indebted developing countries have come under immense pressure this year, strained by supply shocks from the ongoing war in the Middle East, rising food prices triggered by a “super El Niño” and surging borrowing costs.
“These developments impact emerging markets and developing economies’ progress towards achieving inclusive and job-rich economic transformation,” Oyedele said.
Push for greater support
Members of the G24, a bloc of emerging and developing market nations, urged the IMF and World Bank to provide more accessible and affordable concessional financing to vulnerable countries in the near-term, as they worked to mobilise private capital and reduce public spending.
“Debt is something that restrains growth, because countries then do not have enough resources to finance further growth, or they are spending most of their resources just paying off the debt,” said Iyabo Masha, director of the G24 secretariat.
However, she said that recent improvements to the sovereign debt architecture should help countries resolve debt crises more quickly.
READ: African Union launches continent’s first credit ratings agency
Citing Senegal as an example, Masha said the country was “quite close” to a final resolution with its creditors.
Reuters reported last week the West African nation was aiming for an agreement in principle with its official lenders and bondholders by December, two years after the emergence of misreported debt that analysts estimated at $13 billion.
Beyond debt challenges, developing economies also risk being left behind in the rapid adoption of artificial intelligence.
READ: World Bank raises Africa’s growth forecast, urges AI investments
The IMF earlier on Tuesday trimmed its growth forecasts for Latin America and the Caribbean for this year and next, saying most of the region was getting little lift from the AI boom that has helped other economies absorb the energy shock from the Middle East war.
“It is a concern that (AI) will widen the digital divide,” Masha told Reuters on the sidelines of the G24 press conference.
“For the countries that have not yet reached certain levels of development, they will be starting from scratch. The role of AI, they would not benefit much for now.
“Maybe if they have good access to electricity, they may be able to have a data centre investment and all that. But without that, it would take a while for them to start benefiting.”
- Developing economies face a "major barrier" to inclusive growth due to high debt burdens and costs, according to Taiwo Oyedele, chair of the Group of 24 nations.
- Developing countries pay about $500 billion more on their debt compared to developed countries, impacting their fiscal deficits.
- The G24 urges the IMF and World Bank to provide more accessible and affordable concessional financing to vulnerable countries to help manage debt.
- Senegal is nearing a final debt resolution with creditors, with talks expected to conclude by December after misreported debt issues valued at $13 billion.
- Developing economies risk being left behind in the artificial intelligence boom, which could widen the digital divide and limit their growth opportunities.
