According to a new report by the UN Global Crisis Response Group, entitled A World of Debt, a total of 52 countries – almost 40 percent of the developing world – are in “serious debt problem”, said Mr. Guterres, supporting calls for them to receive immediate fiscal relief.
Last year the global public debt reached a record of $92 trillion, of which developing countries shouldered 30 percent – a “disproportionate amount”, the UN chief emphasized.
He warned that 3.3 billion people suffer from the need for their governments to prioritize debt interest payments over “necessary investments” in the Sustainable Development Goals or the energy transition.
“And yet, since these unsustainable debts are concentrated in poor countries, they are not judged to present a systemic risk to the global financial system,” added the UN Secretary-General.
‘Antiquated financial system’
He insisted that the catastrophic levels of public debt in developing countries was a “systemic failure” resulting from colonial-era inequality built on “our old financial system”.
“That system is not fulfilling its mandate as a safety net to help all countries manage today’s cascade of unexpected shocks – the pandemic; the devastating impact of the climate crisis; and Russia’s invasion of Ukraine”.
In fact, the report points out that developing countries are highly exposed to external shocks precisely because they have to pay the debt in foreign currencies.
Africans pay four times more
The head of the UN emphasized that on average, the cost of borrowing is four times higher for African countries than the United States and eight times higher than the richest European economies.
Poor countries are increasingly dependent 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 tool, debt has become “a trap that generates more debt”, lamented Mr. Guterres.
The new UN report proposes several urgent remedies, including an “effective debt exercise mechanism” that supports payment suspensions, longer lending terms and lower interest rates. rate, “including vulnerable countries with middle income”, the head of the UN.
The report also calls for a “massive” scale-up of affordable long-term financing, by changing the way Multilateral Development Banks function, re-engineering them to support sustainable development and leveraging private resources. .
Mr. Guterres recalled that the Bridgetown Agenda, led by Prime Minister Mia Mottley of Barbados and the recent Summit for a New Global Financial Pact in Paris, produced “other important proposals” regarding the international debt relief, and expressed hope that the upcoming G20 meeting in September will bring some of these ideas forward.