Daily Times

Amid cascading crises and inequalities, the head of UN trade agency has called for stronger multilateral solutions to tackle the debt crisis facing developing countries.

Speaking in Geneva, Rebeca Grynspan, Secretary General of the United Nations Conference on Trade and Development (UNCTAD) said that between 70 and 85 per cent of the debt that emerging and low-income countries are responsible for is in a foreign currency. This has left them highly vulnerable to the kind of large currency shocks that hit public spending – precisely at a time when populations need financial support from their governments.

Ms. Grynspan – speaking at the 13th UNCTAD Debt Management Conference on Tuesday – said that so far this year, at least 88 countries have seen their currencies depreciate against the powerful US dollar, which is still the reserve currency of choice for many in times of global economic stress. And in 31 of these countries, their currencies have dropped by more than 10 per cent. This has had a hugely negative impact for many African nations, where the UNCTAD chief noted that currency depreciations have increased the cost of debt repayments “by the equivalent of public health spending in the continent”. The event, which will end tonight, takes place as a wave of global crises has led many developing countries to take on more debt to help citizens cope with the fallout. Government debt levels as a share of GDP (gross domestic product) increased in over 100 developing countries between 2019 and 2021, said UNCTAD. Excluding China, this increase is estimated at about $2 trillion. “This has not happened because of the bad behavior of one country. This has happened because of systemic shocks that have hit many countries at the same time,” Ms. Grynspan said.

With interest rates rising sharply, the debt crisis is putting enormous strain on public finances, especially in developing countries that need to invest in education, health care, their economies and adapting to climate change. “Debt cannot and must not become an obstacle for achieving the 2030 Agenda and the climate transition the world desperately needs”, she argued. UNCTAD said it advocates the creation of a multilateral legal framework for debt restructuring and relief. Such a framework is needed to facilitate timely and orderly debt crisis resolution with the involvement of all creditors, building on the debt reduction programme established by the Group of 20 major economies (G20) known as the Common Framework. “We must support UNCTAD’s call for a reform of international monetary and financial governance,” Bolivian President Luis Acre said in a statement delivered by the country’s finance minister, Marcelo Montenegro. Montenegro called for re-examining key aspects of the international financial architecture, including the debt sustainability assessments that serve as a basis for negotiations between debtors and creditors in relation to debt restructuring.