ISLAMABAD: Stating that the world will face a new and intensifying era of crisis for children in the year ahead, Unicef in a new report, says debt service now consumes eleven times as much as social protection spending across developing countries.

The report, `Prospects for Children: Building Resilient Systems for Children`s Future`, says since 2021, over 130 countries have embarked on fiscal consolidation a trend expected to continue through 2025 with social protection and assistance programmes emerging as key targets for cuts, driven either by mounting debt-servicing burdens or the International Monetary Fund (IMF) bailout conditions.

As developing countries face slowing growth and persistent domestic revenue challenges, becoming ever more dependent on external resources, the landscape of official development assistance (ODA) is changing. As a result, developingcountries are receiving less assistance and as ODA shifts from grants to loans are increasingly burdened with debt.

Meanwhile, the protection gap widens as1.8billion childrenlack accesstocash benefits, leaving them exposed to economic shocks that push families deeper into poverty.

According to the report, the systematicunderfunding ofthese socialsectors has profound and enduring effects on children, especially the poorest and most marginalized, and risks fueling a cycle of inter-generational poverty.

Chronic under-investment in education and health care erodes human capital, leading to a `lost generation` that is less skilled, less healthy and ultimately less productive, making it harder for each generation to escape poverty.

Debt reset Beyond violating children`s rights, this situation undermines long-term economic prospects by limiting the potential of the future workforce. Over the long term, it will compromise the ability of countries to make debt repayments, it says.

The report suggests that a `Children`s Debt Reset` is needed to avoid creating a lost generation. Comprehensive debt forgiveness would create fiscal space for governments to provide essential services to the hundreds of millions of children living in debt-distressed countries. Such a reset would help secure these children`sfutures and align with commitments made in the Pact for the Future and the Declaration on Future Generations.

Automatic triggers for debt-service suspension should activate when disasters strike or acute financial shocks hit, immediately freeing resources for areas such as education, health, nutrition, water, sanitation and hygiene (WASH), and socialprotection.

Risk-informed financing must be scaled up to protect children in fragile and humanitarian contexts. Flexible funding approaches should prioritize preparedness,response and recovery to maximize protection before, during and after crises.

Despite increases in the lending capacity of multilateral development banks, there is still a $4 trillion annual SDG financing gap. Further expansion of the banks` lending capacity is needed -at least $500 billion as a first step.

Innovative financing also holds promise.

Building on the examples of green bonds and climate-linked debt instruments, the International Finance Facility for Immunization, as well as the recently established Child Nutrition Fund, a new Child Investment Facility could leverage $50 billion in donor guarantees to mobilize private investment.

Development assistance needs to be reformed to improve transparency and long-term solutions. The current system enables double-counting across develop-ment, humanitarian and climate commitments, obscuring how much assistance is actually going to support children. A new framework must ensure commitments are counted only towards their primary designation, says the report.

Child impact assessments should become mandatory for all new borrowing decisions, with standardized methodologies to ensure consistent evaluation across countries. Success requires not just policy change but a transformed mindset that sees investment in children as the foundation for both economic sustainability and inter-generational justice.

The strain of debt payments and reduced ODA is leading to alarming disinvestment in health systems across lowincome countries. On average, these countries allocate 1.4 times as much to interest payments as to domestic health expenditures. Over 40 of these countries spend twice as much on debt servicing as on health, including countries with large child populations.

The report says traditional donors are increasingly prioritizing their own security budgets and military spending over development assistance, while facing their own fiscal constraints from recordhigh debt-to-GDP ratios. Concurrently, developing countries themselves are prioritizing security expenditures frequently borrowing to fund these needs which diverts critical resources from child-focused social spending.