‘Breaking’ debt crisis spells development disaster for billions: UN chief

According to a new report by the UN’s Global Crisis Response Team, entitled A World of Debt, a total of 52 countries – nearly 40 percent of the developing world – are in “extreme debt problems”. important”, said Mr. Guterres, the calls for support. them to get quick financial relief.

Last year the world’s public debt reached a record $92 trillion, of which developing countries accounted for 30 percent – “a disproportionate amount”, the UN chief stressed.

He warned that 3.3 billion people suffer from their government’s need to prioritize debt interest payments over “critical investments” in the Sustainable Development Goals or energy transition.

“And yet, because unsecured debts are concentrated in poor countries, we do not judge them to pose a systemic threat to the international financial system,” the UN Secretary-General added.

‘Antiquated financial system’

He insisted that the catastrophic levels of public debt in developing countries were a “systemic failure” resulting from colonial-era inequality built into “our antiquated financial system”.

“That program has not fulfilled its mandate as a safety net to help all countries manage today’s barrage of unexpected shocks – pandemics; the devastating impact of the climate crisis; and Russia’s invasion of Ukraine”.

Indeed, the report points out that developing countries are exposed to external shocks precisely because they have to make debt payments in foreign currencies.

Africans pay four times more

The UN chief emphasized that on average, borrowing costs are four times higher for African countries than for the United States and eight times higher than for the richest European economies.

Poor countries rely on private lenders who charge “sky-high” rates and find themselves forced to borrow more “for their economic survival”, he said.

From an important financial instrument, debt has become “an easy trap in creating more debt”, Mr Guterres lamented.

Quick fixes

The new UN report recommends a number of urgent reforms, including an “effective debt restructuring plan” that supports payment delays, longer loan terms and lower rates, “including for countries that are vulnerable to mid-income salary”, UN leader said.

The report also calls for a “large” scale of affordable long-term financing, by changing the way the Multilateral Development Banks operate, re-engineering them to support sustainable development and increasing private resources.

‘Time is up’

Mr. Guterres recalled that the Bridgetown Program, chaired by Prime Minister Mia Mottley of Barbados and the recent Conference for a New World Trade Agreement in Paris, had generated “other important proposals” regarding global debt relief, and expressed hope that The upcoming G20 meeting in September will take some of these ideas forward.

Check out a series of videos from our colleagues at the UN Geneva showing how different people around the world are dealing with the current cost of the living crisis: