The United Nations Secretary-General, António Guterres, has warned that debt distress among member states places achievement of the Sustainable Development Goals at risk.
Guterres said this at a meeting of several heads of state and government that the UN and heads of multilateral development finance institutions held recently, according to a statement released by African Development Bank.
The meeting was used to call for expansion of the Debt Service Suspension Initiative, under which low-income countries did not pay debt during the Coronavirus Disease crisis.
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The UN scribe, alongside Prime Minister Justin Trudeau of Canada and Prime Minister Andrew Holness of Jamaica, convened the meeting attended by the President of the AfDB Group, Akinwumi Adesina; Director of the International Monetary Fund, Kristalina Georgieva; President of World Bank, David Malpass; Secretary-General of the Organisation for Economic Co-operation and Development, Ángel Gurría: Director-General of World Trade Organisation, Ngozi Okonjo-Iweala, and President of the Inter-American Development Bank, Mauricio Claver-Carone.
Commending ongoing efforts to widen debt relief and improve access to special drawing rights, Guterres called for more support.
He said, “I’m calling for bolder and more ambitious measures. A new debt mechanism could provide a menu of options, including debt swaps, buybacks and cancellations.
“This is also the moment to tackle longstanding weaknesses in debt architecture.”
Holness corroborated Guterres, warning, “Debt servicing has come at tremendous socio-economic cost to our populations, which have borne the burden of steep costs in public expenditure.”
Praising the G20’s decision to extend the debt suspension initiative, he said, “I believe there is a sound basis for it to be further extended to next year. Consideration should also be given to expanding its beneficiaries to include highly-indebted middle-income countries.”
Economic recovery would require a comprehensive approach to increasing fiscal space for poor nations, Georgieva noted.
This must include “measures to include revenue collection, spending efficiency, the business environment, as well as very substantial international support, grants and concessional lending,” she said.
According to her, the IMF had discussed a proposal to allocate additional $650bn in special drawing rights, enabling member countries with strong economic fundamentals to divert reserves to low-income and vulnerable countries.
On his part, Adesina said Africa’s economic recovery would hinge on securing equitable access to vaccines and developing solutions for debt distress.
“Africa needs debt relief, debt restructuring and debt sustainability,” he said, pointing out that in the absence of re-allocations, low-income countries would receive only about 3.2 per cent of special drawing rights.
He further called for the formation of an African financial stability mechanism, modelled on the European Stability Mechanism, to provide jointly guaranteed emergency support.
“The mechanism will provide the much-needed fiscal safety net for African economies and help to avoid regional spillover effect of countries falling into illiquidity and insolvency,” Adesina added.
“Trade and debt sustainability are closely linked,” said the WTO’s Iweala.
“By closing off export opportunities and lowering commodity prices, COVID-19 has worsened debt dynamics for many developing countries.”
She called on governments to “deliver results” at the WTO this year, to reinforce the rules of global trade and pave the way for low-income countries to earn foreign exchange.
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