THE EXTENT OF the global debt crisis is staggering. Low and lower-middle-income countries between them have a total external debt of US$ 1.45 trillion, and in 2023 alone paid US$ 138 billion just to service their debts.

At the beginning of 2025, 54 countries are in debt crisis, at a time of record-breaking humanitarian need and the crippling impacts of climate change. In this topsy-turvy world, debt trumps everything.

Over 75% of all low and lower-middle-income countries spend more on debt servicing than they do on health care, with 55% of these countries spending on debt servicing more than double that of spending on health. Over 50% of lower-income countries are spending more on debt servicing than education.

This has a devastating impact. It means fewer teachers, fewer nurses, larger class sizes, more ill-health, more disease and an inability to respond to climate change. It also means women end up acting as shock absorbers of under-developed public services as they lose access and jobs in those services, and they provide the majority of care in the absence of the state.

In an ActionAid report published this month, Who Owes Who, external debt, climate debt and reparations in the Jubilee year, we ask some fundamental questions. What is really behind this staggering level of debt? Who really owes who?

We tend to view things through the prism of charity — we support the Global South. Yet rich countries have a climate debt, a history of plunder, current day tax avoidance and profit shifting and unmet aid promises.

It is calculated that rich countries have achieved up to 70% of their economic growth by appropriating more than their fair share of the ‘atmospheric commons’, the concept of the Earth being a shared resource that belongs to everyone equally. Based on the lowest estimates in the definitive study of atmospheric appropriation by Fanning and Hickel in 2023, the climate debt that rich polluting countries are liable to pay to climate vulnerable low and lower-middle income countries is US$ 107 trillion. This is more than 70 times greater than the total external debt of US$ 1.45 trillion that these countries collectively owe.

The unfair system

There is a shocking imbalance of global power that enables the external debts of lower income countries to be brutally enforced by the International Monetary Fund, whilst the climate debts of rich countries go largely unpaid and unenforced. To add to this, two thirds of climate financing was given as loans to countries that in many cases are already facing a debt crisis. This is bizarre. How can giving someone a loan count towards paying back a debt?

The most indebted countries of all tend to be rich countries. However, in practice, rich countries pay much lower interest rates on their debt and almost never come under duress as a result of having to make debt repayments. In contrast, low and lower-middle-income countries, which owe a fraction of the amount owed by rich countries, are forced to sacrifice the health, education, social protection, well-being and future prospects of their citizens, following strict IMF austerity steers.

Demands for reparations are likely to gather momentum in 2025 with the African Union declaring this to be the Year of Reparations, and a major summit starting on February 15th. There is also increasing talk about the need to provide wider reparations for the colonial plunder of resources. India, for example, was estimated to have a 24% share of global GDP in 1700, before British colonial rule, but had just a 4% share of global GDP at independence in 1947.

This colonial plunder of resources is not only a historical matter. It is a very real and ongoing part of the present unjust global economic structure, enabling to this day the continuing extraction of resources from the Global South to the Global North.

The State of Tax Justice report in 2024 shows that multinational corporations are shifting on average US$ 1.13 trillion worth of profit into tax havens, causing governments around the world to lose an average US$294 billion a year in direct tax revenue.

The corporate empires

Ireland’s foreign direct investment policy is a core pillar of our economic model and is part of this wider problem.

Too little attention is paid to the impact that corporate profit-shifting and tax avoidance continue to have on developing countries as a result of Ireland’s model. Revenue is being siphoned away that should be paying for hospitals and schools, prolonging a reliance on aid and keeping people trapped in poverty. And these flows are causing immense climate harms.

Research published by the EU Tax Observatory estimated that Ireland remains the destination of approximately $120-140bn of shifted corporate profits annually, jointly the first-largest destination in the world.

ActionAid Ireland research in 2023 revealed that investment managers registered in Ireland held US$ 6.2 billion in bonds and shares attributable to fossil fuels and agribusiness in the Global South. The top six investments are all oil and gas companies.

Broken promises of development aid also are part of the problem. In 1970 a clear target was agreed in a United Nations resolution that each economically advanced country will reach a minimum net amount of 0.7% of its gross national product by the middle of the decade. Just US$ 223.7 billion was mobilised in 2023 representing an average of 0.37% of the GNP of OECD DAC members.

If this target had been met as promised by the mid-1970s – over 50 years ago – this could have provided a cumulative total of up to US$ 7 trillion in additional revenue for low and lower-middle-income countries. Had this quantity of aid been provided, it is unlikely that any of these countries would have needed to borrow the money that has now left them facing a debt crisis.

Now we can add in the devastating impact of USAID cuts, a whooping almost $70 billion in 2023 alone.

The need for reform is clear, and Ireland must play a role. There must be a fundamental overhaul of the global financial architecture, shifting the power over debt away from colonial institutions like the IMF to a more representative and inclusive UN body through agreeing a UN Framework Convention on Sovereign Debt.

In the face of the climate crisis, governments in lower-income countries need to prioritise urgent investments in public services and a just transition over meeting external debt payments. 

African nations at the UN are setting an example, building on their success in shifting oversight of global tax rules from the OECD to the UN, through a new Framework Convention on Tax Cooperation.

It’s time for Ireland and others to unite to call for both debt cancellation and fundamental structural reform to the colonial architecture that perpetuates debt crises.

Karol Balfe is CEO of ActionAid Ireland. ActionAid works to strengthen the capacity and agency of millions of women and girls around the world who face many forms of inequality and violence throughout their lives.