United Nations Secretary General António Guterres on Monday proposed an urgent four-point debt crisis action plan, aimed at addressing the multiple challenges world leaders are grappling with at this time.
Addressing the opening ceremony and plenary of the 15th session of United Nations Conference for Trade and Development being held in Barbados until October 7, he said there were “four glaring challenges, which – if not addressed – make any notion of prosperity for all a distant dream” and had to be dealt with.
These are: “debt distress, systems starved for investment, unfair trade, and a climate emergency that leaves small island developing states like Barbados perilously vulnerable”.
The first challenge, Guterras told the audience, was tackling debt distress because if it was “left unchecked” was a “dagger through the heart of global recovery”.
“Countries cannot build back if they are held back. The international community has taken a few positive steps, but it is time for a quantum leap in support,” he said.
“To start, we know national budgets are being stretched thin by COVID-19, so we must push for an immediate expansion of liquidity for the countries in greatest need. I welcome the recent issuance of $650 billion in Special Drawing Rights (SDRs) by the International Monetary Fund. But this support largely goes to the countries that need them least, as they are distributed according to the quotas.
“Today, I am calling for a substantial re-allocation of unused SDRs, not a symbolic one, a substantial re-allocation to vulnerable countries that need them – including middle-income countries,” he said.
“Second, we know countries are being crushed by debt service costs, so we need an extension and expansion of the G20’s Debt Service Suspension Initiative into next year. The Initiative, and the Common Framework for Debt Treatment Beyond the DSSI have great potential to ease the debt crisis, but they are too limited in eligibility and timeframe.
“Suspending debt service should be extended into next year and also made available to all countries that need it, including middle-income countries,” said the UN Secretary-General.
The third point of the plan involves suspending debt payments, which Guterras said “will not be enough in many countries” which “will need effective debt relief, involving both public and private creditors.
“I renew my call for a comprehensive strategy around reforming the international debt architecture – including debt restructuring or reduction, especially for middle-income countries – to help them avoid deadly cycles of debt waves. We should look at innovative debt instruments like debt swaps, buybacks, and exchanges.
“Fourth and finally, we need private finance to help fill the gap. It is deeply unfair that rich countries can borrow cheaply and spend their way to recovery, while low- and middle-income countries struggle to keep their economies afloat.
“We need to bring together the public and private sectors to develop innovative financing tools to accelerate the return of private investment to pre-pandemic levels, which will, in turn, accelerate recovery. And we need to increase multilateral development bank assistance to lower risk and draw capital to bankable, job-creating projects in communities that need them.
“Taken together, this debt crisis action plan can help ensure that no government is forced to choose between servicing its debts and serving its people,” said Guterres. (GBM)
