The United Nations Development Program (UNDP) joined a slew of institutions and charities on Tuesday in warning that a dire debt crisis is now taking hold in the world’s poorest parts.
In a new report, the UNDP estimated that the 54 countries that account for more than half of the world’s poorest people now need urgent debt relief to escape even greater poverty and give them a chance to tackle climate change.
“Developing economies are facing a severe debt crisis, and are more likely to worsen,” the report published on Tuesday said.
The warning comes as the International Monetary Fund and the World Bank meet in Washington this week amid concerns of a growing global recession and debt crises from Sri Lanka and Pakistan to Chad, Ethiopia and Zambia.
UNDP Administrator Achim Steiner urged a number of measures, including writing off debt, providing comprehensive relief to as many countries as possible, and even special clauses in bond contracts to provide breathing space during the crisis. Joining is included.
“It is important for us to step up and find ways that we can deal with these issues before they become at least as manageable and perhaps unbearable,” he told reporters.
Without effective debt restructuring, poverty will increase and investments in climate adaptation and mitigation will not be desperately needed.
The UNDP report also called for a re-evaluation of the G20-led Common Framework – a plan designed to help countries pushed into financial trouble by the COVID-19 pandemic restructuring debt. So far only Chad, Ethiopia and Zambia have used it.
Its proposal was to expand the eligibility of the Common Framework so that all heavily indebted countries can use it, instead of only poorer countries 70 or more, and automatically suspend any debt payments during the process.
“Both will act as an incentive for creditors to participate and maintain a reasonable timeline, and it may also remove some of the hesitation caused by rating fears for debtor countries,” the report said. stated in the report.
It also recommended that creditors should have a legal duty to cooperate “in good faith” in restructuring a common framework and that countries may offer to take environmentally friendly measures to encourage creditors to write off their debt. Huh.
“It matters a lot,” the report said. “These countries have not only contributed the least, but also bear the highest cost of climate change”.