Debt pressure is changing development strategies

World Bank President Ajay Banga, who is spearheading an initiative that has more than tripled private capital flowing into development projects since 2022, told annual IMF and World Bank meetings that changes were needed to help countries cope with challenges such as ongoing conflicts, a decline in official development assistance and rising debt burdens.

Stating that a major demographic challenge has also emerged, the speaker said that approximately 1.2 billion young people are expected to join the job market in the next 10-15 years, but only 400 million job opportunities are currently available.

According to Banga, the solution will depend on bringing together public finance, private investment, philanthropy and technology to meet each country's needs.

British Foreign Secretary Ed Miliband said that Britain will prioritize debt restructuring and other assistance for the poorest countries during the upcoming G20 presidency.

However, he said Britain and other rich countries would not be able to provide the same level of support as in the massive debt forgiveness initiative at the beginning of the millennium, and said the private sector needed to step in.

Developing countries are also looking for answers outside the Bretton Woods institutions, frustrated by the responses to high debt levels, climate change, worsening inequality and geopolitical challenges.

“The world has changed for the worse in many ways since 2023,” Shekhar Aiyar, director and chief executive of the Indian Council for Research on International Economic Relations, said at an event hosted by the Center for Global Development this week.

“Developing countries are caught in a spiral of slowing growth and increasing fragility… at the same time there has been a massive reduction in bilateral aid.”

International aid from member countries of the OECD Development Assistance Committee decreased by 23 percent in real terms in 2025, the largest annual decline in the history of official development assistance. The five largest donor countries, the United States, Germany, Britain, Japan and France, cut their aid, and these cuts accounted for 96 percent of the total decrease.

Meanwhile, according to UNCTAD, the official UN agency responsible for trade, investment and development issues, the total external debt stock of developing countries reached 12.3 trillion dollars in the same year, increasing by half a trillion dollars compared to 2024.

U.S. President Donald Trump's sweeping tariffs have increased tensions and prompted many developing countries and emerging markets to form new trade partnerships that do not include the United States.

India's Finance Minister Nirmala Sitharaman said in a publication of the Atlantic Council that countries like hers are making concerted efforts to further develop bilateral partnerships.