UN chief sets out debt relief plan ‘to help the vulnerable’

Secretary General of the United Nations (UN), Antonio Guterres has put forward a debt strategy plan that would see a larger portion of international funding going towards developing countries.

Speaking during the opening ceremony of the United Nations Conference for Trade and Development (UNCTAD 15) at the Lloyd Erskine Sandiford Centre this morning, Guterres revealed an “urgent four-point debt crisis action plan”.

He said this would include smaller countries having more access to the Special Drawing Rights (SDRs) issued by the International Monetary Fund (IMF).

“To start, we know national budgets are being stretched thin by COVID-19, so we must push for an immediate expansion of liquidity for the countries in greatest need. I welcome the recent issuance of $650 billion in Special Drawing Rights by the International Monetary Fund.

“But this support largely goes to the countries that need them least, as they are distributed according to the quotas. Today, I am calling for a substantial re-allocation of unused SDRs, not a symbolic one, a substantial re-allocation to vulnerable countries that need them, including middle-income countries,” Guterres said.

The UN General Secretary also recommended that debt relief be granted to those countries as they battle the COVID-19 pandemic and that suspension should continue into 2022.

He also recommended a comprehensive strategy around reforming the international debt architecture, including debt restructuring or reduction.

“We know countries are being crushed by debt service costs, so we need an extension and expansion of the G20’s Debt Service Suspension Initiative (DSSI) into next year.  The initiative and the common framework for debt treatment beyond the DSSI have great potential to ease the debt crisis, but they are too limited in eligibility and timeframe.”

He also maintained that private finance was required to reduce the gap of inequality.

Guterres contended that smaller countries were being disadvantaged by being denied access to similar terms as those of developed nations.

“It is deeply unfair that rich countries can borrow cheaply and spend their way to recovery while low and middle-income countries struggle to keep their economies afloat. We need to bring together the public and private sectors to develop innovative financing tools to accelerate the return of private investment to pre-pandemic levels, which will, in turn, accelerate recovery.

“And we need to increase multilateral development bank assistance to lower risk and draw capital to bankable, job-creating projects in communities that need them. Taken together, this debt crisis action plan can help ensure that no government is forced to choose between servicing its debts and serving its people,” Guterres said.

In a press conference held moments later, Prime Minister Mia Mottley, who will officially assume the presidency of UNCTAD tomorrow, revealed that Barbados’ debt was currently trading “above par” due to its debt restructuring exercise with the IMF in 2018.

However, she said, it meant an intended plan to do a debt-for-nature swap now had to be relooked.

“Indeed the evidence of its success comes in the fact that as we move to have a debt-for-nature plan we realized that we couldn’t even do that properly because having restructured our international debt, where we thought it would have been trading significantly below par, as of last week our debt trades held at 100.5 above par.

“It therefore means that we have had to use other creative mechanisms to be able to see how we can isolate funding for marine conservation because our green economy is 424 times the size of our land territory,” Mottley explained.

“It is against that backdrop that we urge other countries across the developing world not to be timid and to confront the reality of dealing with their debt because you will either service your debt or you will service your people.” (randybennett@barbadostoday.bb)