Dr. Lakmini Fernando Discusses How the Global Financial System Can Be Modified to Ensure Sustainable Debt Management in Developing Countries

29 May 2025

“Global public debt reached US$ 97 trillion in 2023 and 30% of this debt is from developing countries,” revealed Dr. Lakmini Fernando, Research Fellow at IPS Sri Lanka, adding that increasing indebtedness can trigger a new debt crisis.

In a recent paper titled “Global Financial Governance and Debt Sustainability in the Global South,” for the new publication Global South Perspectives, Dr. Fernando discusses how the global financial system can be modified to ensure sustainable debt management in developing countries.

“There were two key outcomes of my research. First, it measures the importance of an independently measured debt threshold to complement the debt sustainability assessments of the International Monetary Fund (IMF). These debt thresholds provide a “safe” debt level in which a country should maintain its debt, to avoid a debt crisis. Second, the importance of non-debt creating financial options to replace the need for new borrowing in the global south,” said Dr. Fernando.

Dr Fernando highlighted that even though numerous development programmes have been implemented across the world, many developing countries remain underdeveloped. Unfairness in global financial architecture, is one main reason for this condition, stressed Dr. Fernando.

“This study indicates the need for a transformed global financial system that is fair for all, and this will ensure long term debt sustainability in the global south,” said Dr Fernando.

Dr Fernando also touched on the “Pact for the Future,” a global agreement adopted by the United Nations in September 2024, which outlines 56 commitments that address key global challenges in creating a more peaceful, sustainable, and inclusive world.

“The commitments made in the “Pact for the Future” can be achieved by creating an unbiased global financial system. Such a system is expected to facilitate the increased availability of alternative financial options, like improved taxation and official development assistance. Eventually these options will help to address the debt problem by replacing or reducing the need for new borrowing in developing countries,” she said.

Global South Perspectives is a new publication from Southern Voice that ensures that voices from the Global South are heard where they matter. It examines how global challenges uniquely impact Southern nations and recommend changes at the global decision-making level for improved national outcomes.

You can find Dr Fernando’s full research paper here.