Pitting developing nations to choose between fighting the coronavirus pandemic and servicing of debt will be too much to ask, says the United Nations Conference on Trade and Development.
UNCTAD published on its website that COVID-19 was a matter of life and death, adding that the pandemic broke out at a time developing countries were already struggling with unsustainable debt burdens and rising health needs.
In 2020 and 2021 alone, developing countries’ repayments on their public external debt will reach between $2.6tr and $3.4tr, the UN agency stated, disclosing that t had taken steps to head off a looming debt disaster in developing countries reeling from the economic fallout from COVID-19.
The report also called for a global debt deal for the developing world, which underlines the vital need for decisive action to provide substantive debt relief to developing countries to free up scarce resources to respond to the raging pandemic.
Speaking on the need for developing countries to avoid facing high and rising shares of government revenues going to debt repayments, thus squeezing health and social expenditures, the UNCTAD Secretary-General, Mukhisa Kituyi, said, “The international community should urgently take more steps to relieve the mounting financial pressure that debt payments are exerting on developing countries as they get to grips with the economic shock of COVID-19.”
In achieving its set out objectives, UNCTAD outlines three steps that will help translate calls to actions. These include automatic temporary standstills that would provide breathing space for crisis-stricken developing countries requesting forbearance to free up resources dedicated to servicing external sovereign debt.
Also included is debt relief and restructuring programme to enable the breathing space gained is used to reassess longer-term debt sustainability.
It also proposed the setting up of an International Developing Country Debt Authority (IDCDA) that will take over the implementation of the two steps while laying institutional and regulatory frameworks to guide sovereign debt restructurings in the future.
Although, the agency had on March 30 called for a $2.5tr COVID-19 crisis package for developing countries, the recent interventions have become very necessary, as previous calls for international solidarity yielded little results.