UN Chief urges govts to provide fresh financing for developing countries
Though significant steps have been taken to prevent debt crises across the world sparked by the COVID-19 crisis, they have not been sufficient to restore economic stability in many developing countries, according to a policy brief issued by the UN Secretary-General on Monday.
More than a year into the pandemic, the fiscal impacts of the crisis are triggering debt distress in a growing number of countries and is severely limiting the ability of many, to invest in recovery and the Sustainable Development Goals (SDGs), including urgently needed climate action, Secretary-General António Guterres said.
According to the policy brief, 42 economies borrowing from capital markets have experienced sovereign downgrades since the start of the pandemic, including 6 developed countries, 27 emerging market economies, and 9 least developed countries.
Sovereign downgrades cause borrowing costs to rise, especially for developing countries, which can, in turn, increase the risk of more nations taking on unsustainable debt – especially if the Covid-19 pandemic is more protracted and deeper than expected.
“Unless we take decisive action on debt and liquidity challenges, we risk another ‘lost decade’ for many developing countries, putting the achievement of the SDGs by the 2030 deadline definitively out of reach,” Guterres said.
The policy brief, entitled Liquidity and Debt Solutions to Invest in the SDGs, takes stock of the global policy response since April last year, assess remaining gaps and challenges for their implementation, as well as propose updates to the recommendations, presented last year, in light of developments over the past 12 months.