A-Infos (en) Italy, FAI, Umanita Nova #21-26 - Loan shark governments. UNCTAD report on financing flows (ca, de, it, pt, tr)[machine translation]

In recent weeks, a report by UNCTAD, the United Nations Conference on 
Trade and Development, was published on financing flows to the poorest 
countries and their costs. These flows are increasingly declining, while 
costs are rising much more rapidly. --- The purpose of these periodic 
updates is essentially propaganda: to show that someone cares about the 
smooth running of things; to demonstrate that, despite the gravity of 
the situation, something can be done to resolve the problems without 
calling into question the current social order; and to demonstrate that 
we must trust governments and intergovernmental organizations, which are 
the only ones with the power to address global emergencies.

Financing development is becoming increasingly difficult. Financial 
flows from richer countries are too expensive, too volatile, and too 
limited to support the investments that the countries UNCTAD defines as 
developing countries need to achieve the Sustainable Development Goals 
(SDGs).

Between 2018 and 2024, 99 developing countries home to 5.5 billion 
people saw the share of public revenues available for development 
spending decline, due to rising debt interest payments.

The report shows how rising external borrowing costs, shorter repayment 
periods, and persistent risk premiums are impacting these countries' 
public finances.

New inflows of direct investment into developing countries, portfolio 
and otherwise, by non-residents, and bilateral transfers from foreign 
governments totaled nearly $1.5 trillion. Of these, $722 billion were in 
the form of equity instruments, $713 billion were debt-related flows, 
and $50 billion consisted of external transfer payments from other 
governments. Although domestic financial flows have been larger, at 
approximately $11.9 trillion, external financing has an outsized 
influence on the terms and conditions of domestic finance.

There is a significant and growing financing gap estimated at 
approximately $4.3 trillion annually between the domestic and external 
financing resources that developing countries can access and the 
resources they need to finance the investments needed to achieve their 
sustainable development goals. Governments in these countries would need 
to invest a total of approximately $17.7 trillion annually (current 
annual spending of $13.4 trillion) between now and 2030 to achieve their 
2030 Agenda goals. If this gap were split between external and domestic 
sources in proportion to the size of their respective flows in 2024, an 
increase in new foreign financial flows to developing countries of 
approximately $476 billion annually would be required. Of this total, 
approximately $230 billion is expected to come from additional capital 
flows, $230 billion from additional debt flows, and $16 billion from 
additional bilateral transfers.

Despite the need to increase investment, foreign financing is 
increasingly declining in supporting investment in developing countries. 
In 2024, these countries received significantly less foreign financing 
than developed countries. Foreign sources accounted for 11% of 
investment financing in developing economies, compared to 38% in 
developed economies. Furthermore, external financial flows to developing 
countries decreased by 18% between 2014 and 2024, while domestic 
financing increased by 60%. Finally, Africa received only 10% of total 
external flows to developing countries, despite representing 22% of the 
developing world's population, while Asia and the Pacific attracted over 
70%.

In addition to its limited volume, foreign financing is typically more 
expensive for developing countries than for developed economies. Rising 
debt servicing costs have become the main driver of the high cost of 
capital and have placed significant pressure on public finances. In 
2024, these countries paid $384 billion in interest payments on foreign 
debt instruments. Between 2014 and 2024, the cost of servicing foreign 
debt grew much faster than the debt stock itself. Since many developing 
country governments rely on foreign financing to finance their spending, 
this has placed increasing pressure on public finances.

The pressure on governments is severe: government interest payments in 
developing countries increased by 102% between 2014 and 2024, while 
government revenues increased by only 39%. Between 2018 and 2024, 73% of 
developing country governments lost budget space for education, 
healthcare, infrastructure, and other public investments as public 
spending was absorbed by rising borrowing costs.

To put the scale of the problem into perspective, if 94 developing 
country governments could borrow at the same rates as developed 
economies, they could collectively save approximately $500 billion 
annually in interest payments. These savings could finance approximately 
375,000 schools; more than 1.3 million primary healthcare centers; and 
the installation of more than 920 gigawatts of solar capacity annually.

Sovereign external debt conditions have deteriorated sharply since the 
COVID-19 pandemic and global monetary tightening. Government bond yields 
have risen, issuance volumes have declined, and lending rates have risen 
to historic highs.

Conditions improved slightly in 2025. Even so, borrowing costs for 
developing countries remained above those faced by developed economies.

The report highlights that average government bond yields for developing 
countries rose from around 5% before the pandemic to 6.8% between 2022 
and 2024, before declining to 5.7% in 2025; average spreads for 
developing countries remained around 1.9 percentage points above the 
benchmark rates for developed countries in 2025; and finally, average 
bond repayment maturities fell from around 17 years before 2021 to just 
9.5 years in 2025, increasing refinancing risks.

Borrowing remains central to financing public debt, but borrowing 
conditions are challenging, as interest rates on foreign loans reached a 
record 4.9% in 2024. Even multilateral lending, traditionally a source 
of stable and low-cost finance, has seen costs rise sharply in recent years.

The report concludes by calling for coordinated national and 
international action by governments.

In this report, UNCTAD is forced to admit that debt is a powerful tool 
for imperialist governments to exert pressure on poorer states. Even the 
financial instruments developed by China and the BRICS governments do 
not escape this logic, although they compete with those of the 
International Monetary Fund and Anglo-American imperialism and therefore 
offer less extortionate terms.

The report paints a picture of a series of states on the brink of 
bankruptcy, forced to borrow ever more to avoid this failure. On the 
other hand, governments can do very little: every action they take has a 
cost, and to cover that cost they need funding. Imperialist governments, 
to which the UNCTAD report essentially appeals, have so far been 
incapable of resolving this situation, like any other of the hundred 
global problems, because governments are the problem, not the solution.

History teaches us that the only way out of the debt spiral is to 
abolish debt, but abolishing debt means abolishing government, which is 
supported by public debt.

Tiziano Antonelli

https://umanitanova.org/governi-strozzini-rapporto-unctad-sui-flussi-di-finanziamento/
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