Small Island Developing States (SIDS) and least developed countries (LDCs) are facing growing debt burdens, as volatile exchange rates, amplified by climate shocks, inflate the cost of servicing external debt. These pressures are diverting critical resources away from development priorities and social protection, reinforcing cycles of vulnerability. This paper quantifies the economic impact and outlines practical solutions to mitigate debt distress and promote resilient, equitable growth. These solutions include debt restructuring, local currency financing and trade, and global financial reforms.