G20 declaration: Leaders raise alarm over rising debt in low-income countries

Global debt vulnerabilities took centre stage on Saturday as G20 leaders adopted their 2025 declaration in Johannesburg, warning that rising debt levels in low-income countries are undermining development prospects, weakening fiscal stability, and constraining efforts to tackle poverty and inequality.

The declaration was adopted by 19 of the 21 participating countries, despite the absence of the United States—after President Donald Trump failed to send a representative—and Argentina’s decision not to sign the document. Argentina was represented at the summit by Foreign Minister Pablo Quirno on behalf of President Javier Milei.

President Cyril Ramaphosa, host of the summit, confirmed that an “overwhelming consensus” was reached, enabling the adoption of a wide-ranging declaration focused on global economic stability and support for vulnerable nations.

Adoption of the declaration signals a shared commitment by the member states to specific decisions, priorities, and policy directions laid out in the final document.

A key highlight of the declaration is the shared concern that high debt levels in developing, and low-income countries remain a major obstacle to inclusive and sustainable growth. Many such economies, particularly in Africa, are grappling with heavy external refinancing needs, rising borrowing costs, and dwindling private capital inflows.

While the declaration notes that the risk of a global systemic debt crisis “appears broadly contained,” it warns that the situation in low-income countries has become increasingly precarious.

Interest payments on external public debt have more than doubled in the past decade for countries in this category, leaving governments with little room to expand spending on health, education, infrastructure, climate resilience, and other crucial development needs.

“These debt vulnerabilities, along with other risks, are tightening fiscal space and limiting countries’ ability to combat poverty and inequality or invest in long-term development,” the leaders stated.

“The situation is particularly challenging for low-income countries, especially those in Africa.”

The leaders reiterated their pledge to support low- and middle-income countries in addressing debt pressures “in an effective, comprehensive and systematic manner.”

One of the major commitments is the continued strengthening of the G20 Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI). The framework—which has been criticised in the past for delays and weak coordination—will be improved to ensure more predictable, timely, and orderly debt restructuring processes.

The declaration also emphasised the need for enhanced debt transparency from all actors, including private creditors, whose lending to developing economies is often opaque and expensive.

The G20 leaders backed an ongoing review of the IMF–World Bank Low-Income Countries Debt Sustainability Framework (LIC-DSF), the central tool used to assess whether poorer countries can manage their debt burdens.

With debt vulnerabilities rising sharply in recent years, many experts argue the current framework does not sufficiently capture risks or provide a full picture of a country’s true debt exposure. The review aims to refine baseline projections, integrate more realistic macroeconomic assumptions, and ensure all public liabilities—including domestic debt and state-owned enterprise loans—are counted.

A joint IMF–World Bank note highlighted a three-pillar strategy for reducing debt risk: structural reforms and stronger domestic revenue mobilisation; increased external concessional finance; and measures to ease debt-service burdens for countries that are solvent but struggling.

The declaration further notes the increasing use of crisis-resilient debt clauses—contract provisions that allow countries temporary relief during natural disasters or economic shocks. Such clauses, leaders said, can offer “vital breathing space and liquidity.”

G20 members also welcomed ongoing efforts to explore innovative approaches such as debt-for-development and debt-for-climate swaps on a voluntary, case-by-case basis. These instruments, they said, could help strengthen long-term debt sustainability when properly designed.

As the G20 prepares to hand over the presidency to the United States, concerns over global financial stability and the worsening debt outlook for low-income countries remain at the forefront of international economic diplomacy.