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Debt Burden
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The Debt Burden: When Repayment Stifles Growth and Opportunity
The term “Debt Burden” refers to a situation in which a country’s economic growth is constrained by the need to repay loans borrowed from abroad. In such cases, the pressure of debt repayment can erode not only national development but also the basic opportunities that citizens deserve to enjoy.
In this article, we will explore why external debt has become such a pressing issue, examine the current global debt landscape, uncover the underlying inequities embedded within the international financial system, and look at the collective efforts being made to reform this structure for a fairer global economy.
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It All Began Quite Simply —
They Just Borrowed “For a While”
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Have you ever used a credit card?
It’s convenient when you’re short on cash — a quick solution for urgent needs.
But the problem arises when you thought you could repay it, yet the balance keeps growing.
Interest accumulates, late fees pile up, and before long, nearly your entire monthly income goes toward paying off credit card debt.
A stable life becomes almost impossible.
That, in essence, is the situation many developing countries face today.
Replace “credit card” with “external debt,” and “monthly salary” with “export revenue,” and the logic remains the same: a nation can collapse under the same burden.
External debt may sound like a distant issue, something that happens beyond our borders.
But in truth, it’s a problem that concerns us all.
Every nation is part of a shared global system — bound by climate cooperation, development partnerships, and the intricate web of international finance — and therefore, every country bears both responsibility and influence within this structure.
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What Is a Debt Burden?
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The term “debt” refers to money borrowed by a country from foreign governments or international financial institutions such as the IMF or the World Bank.
Initially, these loans are taken out with good intentions — to build roads, construct schools, and expand access to electricity.
But what happens when the exchange rate suddenly soars, exports decline, and interest rates rise?
Under such conditions, the country can no longer repay the loan on schedule. Debt extensions may be denied, while unpaid interest continues to accumulate.
The World Bank defines a debt burden as follows:
“The cost of servicing debt, including both principal and interest,
can constrain economic growth and development.”
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Sri Lanka: When National Default Became Reality
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“Hospitals ran out of medicine.
Gas stations had queues stretching over five hours.
Children dropped out of school,
and parents began cutting back on basic necessities.
This was the reality brought on by debt.”
In July 2022, Sri Lanka declared that it could no longer repay its foreign debt, officially entering national default.
An entire country had collapsed under the weight of its debt.
Sri Lanka’s Economic Snapshot (as of 2022):
• Foreign reserves: approximately $1.5 billion
• Annual external debt repayments: around $7 billion
• Inflation rate: over 55%
• Capacity to import food and medicine: nearly zero
With its foreign reserves depleted, Sri Lanka could no longer import essential goods such as medicine and food.
Fuel shortages forced hospitals and schools to shut down. As anger erupted across the country, citizens took to the streets,
and the president fled abroad under the cover of night.
This is what a “debt shock” looks like — when external borrowing turns into national collapse.
And it’s not just Sri Lanka’s story.
Today, many countries around the world are struggling under similar debt burdens, standing on the brink of economic ruin.
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The Global Debt Landscape in 2024:
Nations Quietly Suffocating Under Debt
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As of 2024, the total external debt of developing countries has reached approximately $8 trillion.
More than 70 nations are struggling under the weight of debt, with external debt accounting for an average of 52% of their GDP.
(Source: IMF & World Bank, 2024)
▶ External Debt in Developing Countries (2024)
1. Total external debt: approximately $8 trillion
2. Average debt-to-GDP ratio: 52%
3. Annual debt servicing costs: $420 billion
4. Countries facing debt distress: 70+ nations
(Source: IMF World Economic Outlook, World Bank Debt Report 2024)
The situation is particularly severe across Africa.
Sub-Saharan African nations collectively owe around $900 billion in external debt—of which nearly 40% is borrowed from private financial institutions charging high interest rates. In many of these countries, the debt-to-GDP ratio exceeds 60–80%, leaving them trapped in a cycle of repayment and underdevelopment.
(Source: World Bank Debt Report, 2024)
Countries at Risk of Default (as of 2024)
In countries like these, the government’s budget that should have been invested in education, healthcare, and food security is instead siphoned off to pay interest on foreign debt.
It’s much like an individual whose entire monthly salary is consumed by credit card payments, leaving them to survive the rest of the month on instant noodles.
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Why Doesn’t the Debt Shrink?
High Interest Rates and an Unjust Global Financial System
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The biggest reason debt never seems to decrease is the crushing weight of high interest rates.
Because interest accumulates so steeply, the amount that countries owe often grows far beyond what they originally borrowed.
But there’s a deeper problem — the international financial system that treats this as “normal.”
In its 2023 report, the United Nations Development Programme (UNDP) noted:
“Many developing countries today are not borrowing to develop — they are borrowing simply to survive.”
According to the IMF, developing countries pay interest rates five to eight times higher than advanced economies.
For example, Senegal faces rates above 10%, while Germany pays less than 1%.
And the reason? Only one: “Perceived risk.”
The global financial market imposes higher interest rates on countries that are poor or politically unstable.
This is known as the “risk premium.”
But can such a system truly be called fair?
Imagine a marathon where some runners wear state-of-the-art running shoes while others run in slippers.
Even if they run the same distance, can we really call it a fair race?
As The Guardian sharply observed:
“The essence of the debt crisis is not merely financial — it lies in an outdated,
undemocratic global financial system.”
This is not just about money.
It’s about who remains indebted, and who profits from that debt — a structural imbalance embedded in the global economy.
To address this, the United Nations Conference on Trade and Development (UNCTAD) proposed:
“The creation of a neutral and transparent debt resolution forum where debtor nations, creditors, international institutions,
and civil society all have a seat at the table.”
Yet, implementation remains elusive.
The interests of powerful nations are deeply entangled, meaning that meaningful reform will be a long and winding road ahead.
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Countries Tackling the Debt Problem
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That doesn’t mean every country is helplessly dragged down by debt. Some have chosen to confront the issue head-on, crafting creative and practical solutions.
The key, after all, is not how much you borrow, but how you use it — and how you repay it.
▶ Ecuador: Protecting the Ocean While Reducing Debt
In 2023, Ecuador agreed to protect 197,000 km² of the Galápagos Marine Reserve for the next 20 years in exchange for partial forgiveness of $1.6 billion in external debt.
This innovative arrangement, known as a “Green Debt Swap,” resulted in:
• About $1.2 billion in interest savings
• An annual $18 million budget dedicated to marine conservation
▶ Ghana: Negotiating First, Reducing the Burden by Half
Before turning to the IMF, Ghana initiated direct negotiations with private creditors.
The results were significant:
• Average interest rate: reduced from 19% to 8.5% (more than half)
• Repayment period: extended from 4 years to over 8 years
• Some debts converted to GDP-linked bonds, adjusting payments based on economic performance
Thanks to these proactive measures, the IMF approved a $3 billion support program for Ghana in 2024.
▶ The Jubilee Campaign: Citizens Erasing $100 Billion in Debt
Launched in the United Kingdom in 1996, the Jubilee 2000 Campaign began with the signatures of 24 million people worldwide.
The results were groundbreaking:
• Over $100 billion in debt canceled across 36 countries
• Free education opportunities for more than 50 million children
• Primary school enrollment doubled in over ten African nations
Today, the Jubilee Debt Campaign continues to advocate for fair lending rules, debt transparency, and a multilateral negotiation framework.
(출처: Jubilee Debt Campaign, 2024)
▶ Kenya: Managing Debt Transparently Through Digital Innovation
In 2024, Kenya, in partnership with the African Development Bank (AfDB), introduced a blockchain-based digital accounting system to track external debt repayments. The outcomes have been impressive:
• Ministries share repayment data in real time
• Duplicate claims and accounting corruption prevented
• All transactions recorded in a public database
• Annual financial leakages reduced by an estimated $10 million
Debt today is no longer just a question of “borrowing less.”
It’s about how debt is structured and what social value it can create.
Some nations protect their oceans.
Some sit down with creditors before crises escalate.
Some citizens, through collective action, have erased $100 billion in debt.
And now, technology is ushering in a new era of transparency and accountability in global finance.
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What We Can Do
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The issue of external debt may seem like a grand, distant economic concern, but in truth, it’s deeply connected to our daily lives.
Every small choice we make can plant the seed of change.
1. Buy Fair Trade Products
A cup of coffee or a piece of chocolate can give producers in developing countries a fair income and a chance for self-reliance.
2. Support ESG Investments or Green Savings
: By entrusting your money to ethical finance, you help sustain a more responsible and sustainable global economy.
3. Join Global Campaigns (e.g., Debt Jubilee)
: Even simple actions—signing petitions, sharing posts, or engaging online—can help shift international opinion and influence policy change.
4. Choose Social Enterprise Products
: Ethical consumption is more than just a choice—it’s a vote for the kind of economy we want to build.
5. Share Information About Debt Issues
: Read the news, share stories, start conversations. The quietest action—awareness—can be the most powerful.
External debt is not merely a matter of economic indicators.
It is a question of human dignity and the right to live with opportunity.
What we need now is not sympathy, but imagination and solidarity—to transform the structures that perpetuate inequality.
“Reducing the debt burden of developing countries is a moral responsibility of the international community.”
— Ban Ki-moon, Former UN Secretary-General & Sunhak Peace Prize Founder's Award Laureate (4th Award)
Written by Sharon Choi
Director of Planning
Sunhak Peace Prize Secretariat