New exclusive analysis has laid bare how wealthy private investors and major asset managers in the Global North are positioned to reap billions in profits from countries spiralling into severe debt distress. The research, shared with The Independent by charities Christian Aid and Debt Justice, highlights a stark financial imbalance as climate and economic crises intensify pressure on the world's poorest nations.
The Profits Amidst the Crisis
The investigation focuses on 15 low and lower-middle income countries deemed at high risk of, or already in, debt distress by the IMF and World Bank. It calculates that holders of these nations' debt are set to make total profits of a staggering $60 billion. This figure represents how much more bondholders will earn compared to if they had lent to the US government over the same period.
Among the biggest beneficiaries are funds managed by some of the world's most prominent financial institutions:
- Funds managed by BlackRock stand to make an estimated $2.1 billion in profit.
- Those managed by Goldman Sachs are set to gain around $900 million.
- Funds under JP Morgan management are estimated to profit by $700 million.
- UBS and PIMCO funds are each looking at approximately $500 million in profits.
The methodology, which used publicly disclosed bond ownership data, notes that if bonds were bought more recently at lower prices, the actual rate of profit would be even higher. These nations, struggling to balance their books, are often sacrificing vital health and education spending to service these debts.
A Vicious Cycle of Debt and Deprivation
The analysis emerges against a dire global backdrop. The IMF identifies over 30 countries at high risk of or already in debt distress. Developing countries now spend an average of 15% of government revenue on foreign debt each year, a sharp rise from 6.6% in 2010. An estimated 3.3 billion people live in countries that spend more on debt payments than on education or health.
This crisis has been fuelled by a perfect storm: loans taken in a low-interest era, the economic fallout from the Covid-19 pandemic, soaring energy prices after Russia's invasion of Ukraine, climate-related disasters, and expensive trade barriers. Loans in foreign currencies become even more costly as local currencies weaken.
The situation is described as a "vicious cycle," where low-income countries borrow more to cover costs for an escalating climate crisis they did little to cause. For example, Nigeria is projected to pay an average of $13bn annually to external private creditors between 2025 and 2030—a sum nearly identical to the $13.4bn cost of its national climate strategy for solar power, clean cooking fuels, and ending methane flaring.
The UK's Pivotal Role and Calls for Mandatory Relief
Campaigners are increasingly focusing on the UK government to drive change. The City of London's status as a global financial hub means around 90% of the debt owed by countries eligible for relief under the G20's Common Framework is governed by English law.
"The majority of debts African and other low-income countries owe to private creditors are governed under English law," explained Jess Salter from the NGO Bond. She argues the UK should use its jurisdictional power to compel private creditor participation in debt relief.
MP Sarah Champion, Chair of the International Development Select Committee, adds: "The Government could and - now more than ever, should - bring in legislation to ensure private creditors provide more debt relief enabling low-income countries to invest in areas such as health, education and tackling the climate crisis."
However, the UK government has so far only encouraged voluntary participation from banks. Maria Finnerty, lead economist at CAFOD, criticises this approach: "Our argument is that it should be mandatory and legally enforceable. A voluntary approach hasn't worked over more than a decade... the government is acting cautiously because they are terrified of upsetting the City of London."
Tim Jones, Policy Director at Debt Justice, challenged the fiduciary duty argument often used by asset managers: "If these financial institutions claim that they cannot take part in sufficient debt relief because of their fiduciary duty... then this is why we call on them to support legislative changes so that all private creditors have to take part."
In response to the analysis, a BlackRock spokesperson stated: "BlackRock is a long-term investor in emerging market sovereigns on behalf of our clients... our responsibility is to act in their best financial interests at all times." JP Morgan and Goldman Sachs did not respond, while UBS and PIMCO declined to comment.
A HM Treasury spokesperson said: "Tackling unsustainable sovereign debt is an important international priority. We are committed to an international financial system that supports development outcomes and helps low-income countries address their debt vulnerabilities."
With the G20's Common Framework failing to deliver debt write-offs for any of the four countries that applied, and with major aid cuts announced by nations including the UK, the pressure for a systemic solution is mounting. As Finnerty concludes, solving the private creditor problem could "genuinely... solve one of the key problems that has been holding countries back for so long."
