HT team
October 11, 2022: More than half of the world’s poorest people, living in 54 developing economies, need urgent debt relief due to a cascading global economic crisis, according to a UN report.
The risks of inaction are dire, according to a new paper titled ‘Avoiding ‘Too Little Too Late’ on International Debt Relief’ published on October 11 by the United Nations Development Programme.
Suppose these countries do not get access to effective debt restructuring. In that case, poverty will rise, and desperately needed investments in climate adaptation and mitigation will not happen —mainly since countries affected are among the most climate-vulnerable in the world.
“The 54 countries with severe debt problems are home to more than half of the world’s poorest people,” said Achim Steiner, vice-chair of the UN Sustainable Development Group.
‘Small pill for wealthy’
“Yet they represent little more than 3% of the global economy. Debt relief would be a small pill for wealthy countries to swallow, yet the cost of inaction is brutal for the world’s poorest.
“We cannot afford to repeat the mistake of providing too little relief, too late, in managing the developing economy debt burden,” Steiner said.
Market conditions are shifting rapidly as synchronized fiscal and monetary contraction and low growth is fuelling global volatility.
A debt deal might be on the horizon as these market conditions encourage private creditors to negotiate debt relief under the G20’s Common Framework for Debt Treatments. Higher interest rates, a strong dollar and a looming global recession, could change their bargaining position.
Rapid deterioration
“Rich countries have the resources to end the debt crisis, which has deteriorated rapidly partly due to their own domestic policies. These policies have sent interest rates in developing economies skyrocketing and investors fleeing.
“This happens while developing economies have large financing shortfalls for fighting climate change. The 54 most debt-vulnerable countries include 28 of the world’s top 50 most climate-vulnerable nations,” according to the report.
G20 finance ministers will meet in Washington this week before the World Bank-IMF Annual Meetings.
“Conditions are ripe for creditors and debtors to kickstart debt restructuring talks under the G20’s Common Framework and avert a developing country debt crisis that could otherwise spill over to a long-term development crisis.”
