Developing nations bear the brunt of global bond market turmoil

Recent spikes in bond market volatility, driven by Middle East conflicts and expansive fiscal spending, have pushed borrowing costs up in virtually every major economy. Developing countries with substantial debt burdens are experiencing the sharpest pressure, with debt servicing already accounting for a large portion of their fiscal resources. Experts note that before the latest shocks, debt payments absorbed 45% of revenues in the global south and 70% in low-income nations, crowding out essential public services.

Calls for overhauling the international debt framework have intensified, with African Union heads and G20 chairs advocating reforms. The G20, which previously coordinated debt relief initiatives, will see its 2025 presidency transferred to the United Kingdom, where Labour officials have pledged to place unsustainable debt and AI regulation on the agenda. A think-tank proposal suggests a multi-year debt-service holiday for the most burdened countries, funded largely by private creditors, to free up resources for climate and development goals.