V20 Debt Review (4th Edition)
Climate-vulnerable economies continue to face a difficult financing environment in which high borrowing costs, constrained external finance, and persistent debt vulnerabilities limit the ability to scale investment in resilience and development.
The Fourth Edition of the V20 Debt Review found that although the V20’s aggregate external debt stock declined modestly in 2024 after peaking in 2023, the underlying financing constraint has not materially improved. Debt service remains elevated, a growing share of countries devote 10% or more of government revenue to external debt payments, and domestic interest costs are placing additional pressure on public budgets.
Multilateral institutions continue to provide an important source of external public finance, but overall net transfers have fallen sharply from their pandemic peak.
Key Highlights:
- Debt vulnerabilities remain widespread. Of 48 PRGT-eligible V20 members assessed by the IMF and World Bank, 5 are in debt distress and 16 are at high risk, about two-thirds combined. Only 4 are at low risk.
- The recent easing in debt stocks has not translated into lower debt service pressures. In 2024, 25 countries spent 10–20% of government revenue on external debt service, and 8 spent 20% or more. Rising domestic interest costs add further strain.
- External financing conditions remain difficult. Net transfers to the V20 stayed positive but fell to about US$11 billion, down from roughly US$53 billion at the 2020 peak. MDB net transfers halved. Bondholder flows were barely positive, and flows from China and other creditors turned negative.