UN, Canada, Jamaica spearhead action to prevent debt crisis
The United Nations chief and the prime ministers of Canada and Jamaica urged far bolder action Monday to prevent a debt crisis, including extending the moratorium on debt repayments and providing urgent cash liquidity to developing countries to respond to the COVID-19 pandemic and invest in economic recovery.
Secretary General Antonio Guterres said a debt crisis will have the greatest impact on the poorest people in the most vulnerable countries, but he warned that it can’t be confined to any region or country and that “there have been credible forecasts of losses of global output in the trillions of dollars”.
“Unfortunately, not enough has been done to support those countries – many dozens of countries – that are at highest risk,” he told reporters after a high-level virtual meeting with world leaders including prime ministers Justin Trudeau of Canada and Andrew Holness of Jamaica, who joined the press conference virtually.
Guterres urged “far bolder steps” on a moratorium on debt payments, targeted debt relief and reforms to the international debt architecture.
Earlier this month, the Group of Seven leading industrial nations proposed bolstering the International Monetary Fund’s reserves for the first time since the 2009 financial crisis, so the Washington-based institution can provide more financial support to developing nations during the coronavirus crisis – a move welcomed by Guterres, who has been pushing for increased liquidity for the past year.
Any increase in so-called special drawing rights will have to be signed off by other countries at the IMF’s spring meeting in April.
Stressing that the debt crisis is already “emerging”, Holness urged that the debt service suspension by the Group of 20 major economic powers, which has been extended through June, be further extended “to at least the end of this year, and ideally, to the end of 2022”.
“While recognising that many low-income countries are at high risk of debt distress, there are several middle-income countries that are also at risk,” he said, urging the G20 to expand the debt service suspension to include vulnerable middle-income countries.
Holness also urged the establishment of a “mechanism” under which sovereign debtors and various creditors can negotiate agreements to restructure debts “in an orderly fashion, subject to agreed rules and procedures”. He said the mechanism should address “the long-standing problem of holdout creditors”.
The secretary general said those who met Monday are not the decision-makers.
“We are saying what we believe needs to be done, and the truth is that it’s starting to have an impact,” Guterres said. “So I believe our role is to go on telling the world what needs to be done and hoping that, progressively, those that have decision-making capacity ... will be moving in the right direction.”
Trudeau said the G7 and G20 are working together.
“We need to make sure at the same time as we are focused on the health, we are also focused on the health of the global economy,” Trudeau said. “And that means taking real action by leading countries around the world to recognise that it is not just in the global interest but in their own interest to ensure a more equitable global recovery.”