Labour has got the message – developing nations suffer most from bond market turmoil | Heather Stewart

Labour has got the message – it’s developing nations suffering most from bond market turmoil Heather Stewart in Bangkok Just as Brown and Blair did in 2005, Andy Burnham aims to champion debt relief to help developing countries

F rom Washington to Paris, London to Tokyo, policymakers in every large economy have been counting the costs of bond market turmoil in recent weeks. But the brunt of the pain is being borne by heavily indebted developing countries that have little hope of influencing the whims of global investors, but pay the price regardless.

Markets have responded to the war in the Middle East, and a spendthrift White House, by dumping government bonds – driving up borrowing costs just about everywhere.

Finance ministers and central bankers gathering in Bangkok this week for the annual meetings of the International Monetary Fund and the World Bank may be loth to point the finger at Donald Trump’s regime, but all are at least in part hostage to the US president’s war plans.

That has made what was already a perilous situation even worse – just as the world is battling an energy crisis, and as developing countries urgently need to invest in adapting to the climate emergency.

Even before the latest market gyrations, experts calculated that debt servicing costs absorbed 45% of government revenues in the global south , and 70% in low-income countries. That crowds out desperately needed spending on public services and investing for the future.

There have been growing demands for reform of the framework for international debt in recent years, including from African Union heads of state , and under the G20 chairs of Brazil and South Africa.

The G20 – the forum in which Gordon Brown coordinated a global fiscal stimulus package in the depths of the financial crisis in spring 2009 – is meant to be an important body for discussing international economic issues. With a much wider membership than the G7, it has coordinated previous efforts on debt, including establishing the IMF-administered Common Framework, to which struggling countries can apply, and suspending repayments for hard-hit borrowers during the Covid crisis.

However, this year’s chair has been Trump’s US, which has placed much more emphasis on other aspects of the G20’s remit, including promoting global economic growth – somewhat ironically, given the main obstacle to achieving it is the war on Iran.

Next year, the presidency falls to the UK, and Labour has made clear it will have different priorities. These will include seeking a global agreement on AI regulation, which seems a faint hope but is clearly worth pursuing.

The UK also intends to put unsustainable debt on the agenda. The foreign secretary, Ed Miliband, who will be in Bangkok, told Labour conference delegates last month: “Friends, I promise this. We will use our G20 presidency next year to meet our responsibilities and mobilise the world, building on the great achievements on debt and development of the last Labour government.”