UNITED NATIONS – UN Secretary-General Antonio Guterres called for greater debt relief and new creative financing to help poorer nations deal with the pandemic and prevent their economic recoveries from falling behind.
A “new debt mechanism” to provide more options — including debt swaps, buy-backs and cancellations – is needed, he said, as many nations have been reluctant to add debt during the global health crisis, fearing a hit to their credit ratings.
Guterres also called on G20 nations to extend the suspension of debtors’ loan payments into 2022, and expand the Common Framework for Debt Treatments to include middle-income countries that request it. The G20 agreed to suspend debt payments in April 2020, but that measure is set to expire at the end of June.
“We need to change the rules,” the UN chief told a high-level meeting with dozens of heads of state as well as IMF, World Bank Group and OECD bosses, saying old methods were no longer working.
“We are on the verge of a debt crisis,” he said, calling for “urgent action.”
Richer nations, he said, had spent an unprecedented $16 trillion on emergency health and economic measures, preventing a downward spiral and setting the stage for recovery.
“But many developing countries cannot invest in recovery and resilience, because of financing constraints,” he said, noting that the world’s least developed countries have spent 580 times less per capita on their Covid-19 response than advanced economies.
Guterres cited stark differences in vaccine rollouts in rich and poor nations, and the poorest facing “painfully slow” economic recoveries that risk becoming a drag on the global economy.
Six nations have already defaulted on loans, and one-third of emerging market economies are at “high risk of fiscal crisis,” he said, as more than 120 million people were plunged into extreme poverty over the past year.
“Developing countries need access to additional liquidity to respond to the pandemic, and to invest in recovery,” Guterres said.
“The global community must urgently provide the necessary support to all developing countries in need.”
Otherwise, Guterres warned, “we are in danger of emerging from Covid-19 with a two-speed world.”