New Delhi [India], The United Nations has issued a clarion call on rising levels of global public debt, warning of significant threats to global prosperity.
The recent UN Trade and Development Report underlines the urgency of reforming international financial systems to secure the future of both people and the planet.
In a revelation, the report shows that domestic and external government borrowings are set to reach an unprecedented peak of US$97 trillion in 2023, an increase of US$5.6 trillion from the previous year.
The United Nations Conference on Trade and Development (UNCTAD) has reiterated the need for urgent reform of the global debt architecture to prevent a widespread debt crisis, especially among developing countries.
The COVID-19 pandemic has increased borrowing, with developing countries seeing a 15.7 per cent increase in external sovereign debt, which will total US$11.4 trillion by the end of 2022.The complexity of rising debt levels is compounded by the diversity of lenders and financial instruments, and the rise in debt servicing costs is equally troubling.
Low-income and lower-middle-income countries, which borrowed heavily during periods of low interest rates and high investor enthusiasm, are now devoting about 23 percent and 13 percent of their export revenues, respectively, to repaying external debt.
This growing debt burden is draining vital public resources needed for essential development, with approximately 3.3 billion people – almost half of humanity – living in countries that spend more on debt interest than on education or health. Are.
The report strongly advocates a comprehensive reassessment of the various factors affecting debt dynamics, including the implications of sovereign debt on public health, global economic shifts, rising interest rates, geopolitical realignment, political instability and industrial policies in debtor states.
To address the crisis, UNCTAD recommends promoting concessional loans, characterized by low interest rates and extended repayment terms.One proposed solution is to increase the base capital of multilateral and regional banks to expand their lending capacity.
Another suggestion is to increase concessional finance through the issuance of special drawing rights (SDRs), an international currency created by the IMF to increase monetary reserves by allowing member countries to exchange them for official currencies as needed. It is designed for.
The report also calls for greater transparency in the terms and conditions of financing. Legislative measures in lending countries as well as reducing resource and information asymmetries between borrowers and lenders can help discourage predatory lending practices.
Further recommendations include expanding access to foreign currencies for developing countries through central bank swaps and enhancing their resilience during external crises through stable rules on debt obligations such as climate-resilient debt clauses.Additionally, the report emphasizes the need for well-developed rules for automatic debt restructuring and a strong global financial safety net.
These measures are important to ensure that developing countries can deal with the complexities of global debt without compromising their development goals.
The recent UN Trade and Development Report underlines the urgency of reforming international financial systems to secure the future of both people and the planet.
In a revelation, the report shows that domestic and external government borrowings are set to reach an unprecedented peak of US$97 trillion in 2023, an increase of US$5.6 trillion from the previous year.
The United Nations Conference on Trade and Development (UNCTAD) has reiterated the need for urgent reform of the global debt architecture to prevent a widespread debt crisis, especially among developing countries.
The COVID-19 pandemic has increased borrowing, with developing countries seeing a 15.7 per cent increase in external sovereign debt, which will total US$11.4 trillion by the end of 2022.The complexity of rising debt levels is compounded by the diversity of lenders and financial instruments, and the rise in debt servicing costs is equally troubling.
Low-income and lower-middle-income countries, which borrowed heavily during periods of low interest rates and high investor enthusiasm, are now devoting about 23 percent and 13 percent of their export revenues, respectively, to repaying external debt.
This growing debt burden is draining vital public resources needed for essential development, with approximately 3.3 billion people – almost half of humanity – living in countries that spend more on debt interest than on education or health. Are.
The report strongly advocates a comprehensive reassessment of the various factors affecting debt dynamics, including the implications of sovereign debt on public health, global economic shifts, rising interest rates, geopolitical realignment, political instability and industrial policies in debtor states.
To address the crisis, UNCTAD recommends promoting concessional loans, characterized by low interest rates and extended repayment terms.One proposed solution is to increase the base capital of multilateral and regional banks to expand their lending capacity.
Another suggestion is to increase concessional finance through the issuance of special drawing rights (SDRs), an international currency created by the IMF to increase monetary reserves by allowing member countries to exchange them for official currencies as needed. It is designed for.
The report also calls for greater transparency in the terms and conditions of financing. Legislative measures in lending countries as well as reducing resource and information asymmetries between borrowers and lenders can help discourage predatory lending practices.
Further recommendations include expanding access to foreign currencies for developing countries through central bank swaps and enhancing their resilience during external crises through stable rules on debt obligations such as climate-resilient debt clauses.Additionally, the report emphasizes the need for well-developed rules for automatic debt restructuring and a strong global financial safety net.
These measures are important to ensure that developing countries can deal with the complexities of global debt without compromising their development goals.
