The United Nations Development Programme (UNDP) added its voice to the chorus of organisations and charities warning that a severe debt crisis is now settling in the world’s most underdeveloped regions. The warning comes as the World Bank and IMF convene in Washington this week amid growing concerns about a worldwide recession and a wave of financial crises ranging from Sri Lanka and Pakistan to Chad, Ethiopia, and Zambia.
In a recent assessment, the UNDP calculated that in order to prevent further severe poverty and give these nations a chance to combat climate change, 54 countries, or more than half of the world’s poorest people, now required rapid debt relief.
The UNDP administrator, Achim Steiner, called for a range of actions, including the cancellation of debt, providing more relief to more nations, and even incorporating specific language in bond contracts to allow for breathing room during crises. “It is urgent for us to step up and find ways in which we can deal with these issues before they become at least less manageable and perhaps unmanageable,” he said.
Poverty will increase in the absence of comprehensive debt restructuring, and crucial investments in climate adaptation and mitigation will not be made.
The UNDP report also advocated for a recalibrating of the G20-led Common Framework, a mechanism created to aid nations facing debt restructuring difficulties due to the COVID-19 epidemic. It has only been utilised thus far in Zambia, Ethiopia, and Chad.
It suggested expanding the Common Framework’s eligibility so that all deeply indebted countries could use it rather than only the roughly 70 poorest countries, and it suggested suspending any debt payments automatically while the procedure was taking place.
It also suggested that governments might promise to take eco-friendly steps to entice creditors to write down their debt and that creditors should have a legal obligation to participate “in good faith” in Common Framework restructurings.
