United Nations Secretary-General Antonio Guterres has warned of a potential development disaster for billions of people due to a ‘crushing’ debt crisis, according to a new report released by the UN Global Crisis Response Group. The report, titled A World of Debt, revealed that 52 countries – almost 40 per cent of the developing world – are in ‘serious debt trouble’.
Global public debt has now reached a record high of $92 trillion, of which developing countries shoulder 30 per cent – a ‘disproportionate amount’, the UN chief said. He warned that 3.3 billion people are suffering from their governments’ need to prioritize debt interest payments over essential investments in the Sustainable Development Goals or the energy transition.
Mr. Guterres insisted that the catastrophic levels of public debt in developing countries are a ‘systemic failure’ that resulted from colonial-era inequality built into ‘our outdated financial system’. He pointed out that developing countries are highly exposed to external shocks precisely because they have to service debt repayments in foreign currencies.
The UN chief stressed that on average, borrowing costs are four times higher for African countries than for the United States and eight times higher than for the wealthiest European economies. Poorer nations rely increasingly on private creditors who charge ‘sky-high’ rates and find themselves forced to borrow more ‘for their economic survival’, he said.
The UN report proposes a number of urgent remedies, including an ‘effective debt workout mechanism’ that supports payment suspensions, longer lending terms and lower rates, ‘including for vulnerable middle-income countries’. The report also calls for a ‘massive’ scale-up of affordable long-term financing, by transforming the way that Multilateral Development Banks function.
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, had generated ‘other important proposals’ regarding international debt relief, and expressed hopes that the upcoming G20 meeting in September will take some of these ideas forward.
Check out a series of videos from our colleagues at UN Geneva highlighting how different people around the world are dealing with the current cost of living crisis: