According to the report, development financing is being constrained at a critical time: a quarter of developing countries still have a lower per capita income than before the pandemic, and some 3.4 billion people live in countries that spend more on interest payments than on health or education.
Official Development aid has fallen drastically.Foreign investment continues to decline and many countries struggle to raise enough tax revenue to finance basic services.
At the same time, Global trade tensions and rising tariffs are adding to economic pressures.particularly for less developed countries.
Signs of resilience
Despite the bleak outlook, the report points to areas of resilience. Global economic growth exceeded expectations in 2025Trade between developing countries (South-South trade) has expanded rapidly over the past two decades, with investment in renewable energy reaching a record $2.2 trillion in 2024, double the level invested in fossil fuels.
However, the authors stress that progress will not be sustained without urgent action, identifying a funding gap of up to $4 trillion annually for developing countries and calling for accelerated implementation of the Seville Commitment (a 2025 global agreement to increase development finance) as the best – and only – realistic way to get back on track.
Key priorities include increasing investment, strengthening multilateral cooperation, modernizing the international financial system to give developing countries a stronger voice, and building resilience to better withstand future crises.
Without renewed global cooperation and political will, the report warns, the promise of the SDGs – and a more equitable future – will remain out of reach.
War in the Middle East fuels slowdown
Speaking at UN Headquarters on Monday, Secretary-General António Guterres said the conflict in the Middle East adds to the risks facing development.
“We are seeing in real time the impacts of war on the cost of fuel, fertilizer and food.“, he said, “as well as commerce, transportation and tourism.”
Rising energy costs, slower growth and currency depreciations, he added, are putting even more pressure on the debt burdens of developing countries.
The UN chief identified three broad areas of focus to reduce the $4 trillion financial gap.
First, “accelerating the financial machinery” (leveraging the Multilateral Development Banks, creating new public-private financing initiatives); second, by reforming debt (including debt relief mechanisms and a “reinvention” of the credit rating system); and third, through a reform of the international financial architecture, so that it reflects the current global economy.