How High Interest Rates and Climate Change are Trapping Developing Nations

How High Interest Rates and Climate Change are Trapping Developing Nations

By the beginning of 2026, global sovereign debt had reached unprecedented record levels, with debt-to-GDP ratios exceeding 100% in many developing and emerging economies, and even surpassing 150% in some cases. This rapid increase, accelerated by the COVID-19 pandemic and the 2022–2024 energy and food crisis, has become an unbearable burden on vulnerable economies, forcing them to make painful economic choices. The primary cause: High interest rates. The main factor exacerbating the crisis is the continued high interest rates set by major central banks—most notably the US Federal Reserve—to combat inflation. These rates have nearly doubled the cost of debt servicing (interest payments) in just three years. The consequences include: A rapid depletion of foreign exchange reserves. A collapse in the value of local currencies against the dollar (in some countries, the decline has reached 40–70% since 2022). A shift in national budgets from productive spending (education, health, infrastructur…