At the Future Investment Initiative (FII) in Riyadh, Saudi Finance Minister Mohammed Al-Jadaan voiced a growing concern that sovereign debt has become the most significant threat to global economic growth in 2025, especially for low-income countries and emerging markets.
Al-Jadaan highlighted the pressures faced by these economies due to escalating debt, limited fiscal capacity, and what he termed “rapidly growing global fragmentation.” His message underscores a vital issue for world leaders, economists, and policy makers who seek sustainable, inclusive growth amid rising financial instability.
Global public debt reached an all-time high of $97 trillion in 2023, a level that has sparked concerns across the international community. According to the United Nations, many economies—particularly in Africa—are straining under the weight of their financial obligations. In Africa alone, the number of countries with debt-to-GDP ratios exceeding 60% increased from six in 2013 to 27 in 2023. Al-Jadaan’s comments at FII reflect growing unease over the disproportionate burden of debt repayments, which are outpacing essential investments in health, education, and climate resilience for many low-income countries.
As debt grows, so does the cost of servicing it, and developing nations are feeling the strain. The Saudi finance minister expressed deep concern about how many low-income countries are now spending more on debt service than on critical areas like healthcare, education, and climate action combined. This imbalance presents a serious challenge, as it diverts resources away from essential services that improve citizens’ quality of life and foster long-term economic stability.
One major factor driving the increase in debt servicing costs is the rising interest rate environment. As central banks worldwide have raised rates to combat inflation, borrowing costs have spiked, placing a heavier strain on countries with substantial debt. Emerging markets, which often borrow in foreign currencies, are particularly vulnerable to fluctuations in interest rates and currency depreciation, making debt repayment even more burdensome. Consequently, high debt levels are squeezing budgets and limiting countries’ ability to respond to economic shocks, making them susceptible to crises that could easily spread beyond their borders.
Global financial organizations like the International Monetary Fund (IMF) and the G20 are taking steps to address these concerns, but finding viable solutions remains a complex challenge. Al-Jadaan expressed hope that these institutions could work together to provide critical support to struggling economies. He emphasized the need for global leaders to be proactive in ensuring debt issues do not unexpectedly destabilize the international financial system.
Moreover, the Saudi finance minister’s comments resonate with a broader call for reforms. Many experts argue that the current global financial architecture needs restructuring to ensure that low-income and emerging economies can manage debt more sustainably. For instance, the United Nations has advocated for debt relief, enhanced lending terms, and greater access to financing for developing countries.
In a world grappling with challenges from climate change to geopolitical tensions, tackling sovereign debt is essential to sustaining global growth and stability. Al-Jadaan’s emphasis on coordinated global efforts highlights the importance of a unified response to prevent economic fragmentation and ensure that all nations have the fiscal flexibility to invest in their people and infrastructure. Without substantial reform and cooperation, sovereign debt will remain a ticking time bomb for the global economy, making 2025 a pivotal year for addressing this pressing issue.
