António Guterres calls for ‘decisive action’ to avert debt crisis in developing world |

More than a year into the pandemic, the fiscal impacts of the crisis are triggering debt overhang in a growing number of countries and severely limiting the ability of many to invest in recovery and the Sustainable Development Goals ( SDGs), including urgent climate needs. action,” said Secretary-General António Guterres.

According to the guidance note, 42 economies borrowing from capital markets have suffered sovereign downgrades since the start of the pandemic, including 6 developed countries, 27 emerging market economies and 9 least developed countries.

Sovereign downgrades lead to higher borrowing costs, especially for developing countries, which may, in turn, increase the risk of more countries taking on unsustainable debt – especially if the COVID-19 pandemic is longer and deeper than expected.

“Unless we take decisive action to address debt and liquidity challenges, we risk another ‘lost decade’ for many developing countries, putting the achievement of the SDGs by 2030 forever out of reach. Mr. Guterres urged.

The policy brief, titled Liquidity and Debt Solutions to Invest in the SDGs, takes stock of the global policy response since April last year, assesses remaining gaps and challenges for their implementation, as well as proposes updates to the recommendations, presented last year, in light of developments over the past 12 months.

Need for debt relief

The note highlights the need for debt relief to create space for investments in recovery and for the achievement of the SDGs.

Even when debt is high, new borrowing can lead to improved creditworthiness if it funds productive investments, he noted, adding that debt relief can also free up resources, create conditions under which countries can revert to voluntary market access and can reduce a country’s debt. overall borrowing costs, with positive effects on the whole economy.

Assistance to small island states

The Secretary-General also urged governments to provide new concessional financing to developing countries, in particular least developed countries and small island developing States, to recapitalize multilateral development banks and to accelerate the timetable for replenishment of funds. , to meet official development assistance (ODA) commitments and to provide long-term financing to developing countries to invest in long-term growth.

In support of recent G7 endorsements, the document also called for a general reallocation of special drawing rights reiterating the need to combine a voluntary reallocation of rights from developed to developing countries.

The brief also urges the G20 to extend the World Bank’s Debt Suspension Initiative (DSSI) until the end of June 2022 and to include middle-income countries, including small island developing states that have been severely affected by the crisis.

He also urged the bloc to extend debt relief eligibility under its common framework for debt treatment beyond the DSSI to other vulnerable countries on a case-by-case basis, as well as to consider other mechanisms that would allow countries to access the framework, without compromising the credit rating.

Financing the 2030 Agenda

The guidance note was released to coincide with the High-Level Meeting of Heads of State and Government on Financing for Development in the Era of COVID-19 and Beyond.

Tuesday’s virtual meeting followed a series of meetings and last year to mobilize action to help economic recovery from the pandemic.

The high-level meeting is co-convened by the Secretary-General, Prime Minister Andrew Holness of Jamaica, and Prime Minister Justin Trudeau of Canada.

Liquidity is vital, urges António Guterres

Addressing the high-level meeting, Mr. Guterres called for urgent support for developing countries to ensure they have the financial liquidity they need to respond to the pandemic and invest in the recovery, or risk a disaster. “lost decade” in terms of development.

“I am encouraged to see that our insistence on the need for a new allocation of Special Drawing Rights by the International Monetary Fund (IMF) and the reallocation of unused SDRs to support vulnerable countries, including middle-income countries, is now widely accepted. … let’s make sure it happens – and is properly managed for the benefit of the developing world,” he said.

The Secretary-General called for a “three-phase” approach to debt, including a moratorium on debt repayment, targeted debt relief and reforms to the international debt architecture.

He also called for more responsible borrowing and lending, accepted by debtor and creditor countries, investors, market participants, credit rating agencies and international organizations, stressing the need for open and limited dialogue over time to build trust and transparency in a systematic and inclusive framework. way.

“Together, with collective resolve, we can help all countries invest in response, recovery and a a more sustainable and resilient future.