Growing debt burden poses significant risk, as developing nations were paying roughly $500bn more for their debt to developing nations—Oyedele

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 Nigeria’s minister of Finance and Coordinator of the economy 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.

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.

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.

Citing Senegal as an example, Masha said the country was “quite close” to a final resolution with its creditors.

Beyond debt challenges, developing economies also risk being left behind in the rapid adoption of artificial intelligence. 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.