MILAN/NEW YORK, APRIL 12 – “If we can save the banks, we can save the hopes of developing countries”. The United Nations Secretary General, Antonio Guterres, wrote this in an editorial in Corriere della Sera, hoping for an extraordinary effort on behalf the G20.
The collapse of two large banks in recent weeks has made headlines around the world. More than $250 billion has been earmarked over a single weekend to protect credit institutions in the United States and Switzerland. “But there has not been such a rescue attempt for dozens of developing countries struggling to cope with a cascade of crises, from climate-related shocks to the COVID-19 pandemic to the war in Ukraine. Events treated as if failure was an acceptable option. The pandemic and unequal recovery hit developing countries hard,” wrote the head of the United Nations.
Developed countries adopted expansionary fiscal and monetary policies that allowed them to invest in the recovery; they have now largely returned to the pre-pandemic growth rates. But developing countries, faced with high debt costs and limited fiscal space, have been unable to do so, argues Guterres, noting that by addressing the financial markets, they could be charged interest rates up to eight times higher than those of developed countries: “A debt trap”.
The Secretary-General then cites the “relentlessly ongoing” climate crisis, with a disproportionate impact on the least developed countries and small island developing states (while developed countries can afford to pay for adaptation and resilience, this is not possible for developing countries) and Russia’s war in Ukraine which amplified and accelerated a global cost-of-living crisis, pushing tens of millions more people into extreme poverty and hunger. 60% of low-income countries are currently at high risk or in debt difficulty: the number has doubled since 2015. Since 2020, African countries have spent more on debt payments than on health care. While each country is characterised by a unique context, the challenges are systemic, perpetuated by a dysfunctional global financial system that focuses on short-term returns and whose returns are too limited and too belated, notes Guterres.
The world is rapidly running out of time to save the 2030 Agenda and the Sustainable Development Goals (SDGs). The prospect of a world in which everyone can benefit from health care, education, decent work, clean air and water and a healthy environment is getting out of hand. Without urgent and ambitious action, this gap will result not only in a catastrophic development deficit in many countries, but in an explosive confidence deficit worldwide: “This is why I call on the G20 to approve a Stimulus on the Goals to increase the long-term funding available to needy countries by at least $500 billion a year to promote long-term investments in sustainable development, particularly where transformation is most urgent: renewable energy, sustainable food systems and the digital revolution. Developing countries need funding and technology to address these transitions with minimal social upheaval”.
This requires, according to Guterres, action in three areas. First, addressing the high cost of debt and the growing debt risk. Secondly, we need to increase long-term subsidised funding for all countries in need. Finally, emergency funding should be extended to countries in need. Last year, the International Monetary Fund allocated $650 billion in special drawing rights, the main global mechanism to increase liquidity during crises. Based on current quotas, the developed countries received 26 times more than the least developed countries and 13 times more than all the countries of Africa combined. Emergency financing should automatically go to the most needy countries. On the contrary, it is widening inequalities.
The interview, in Italian, is available here. (@OnuItalia)
