Serious debt crisis in developing countries – UNDP

Serious debt crisis in developing countries – UNDP

LONDON, Oct 11 (Reuters) – The United Nations Development Program (UNDP) joined a chorus of institutions and charities on Tuesday warning that a serious debt crisis is now taking hold in the most poor of the world.

In a new report, the UNDP has estimated that 54 countries, representing more than half of the world’s poorest people, now need immediate debt relief to avoid even deeper poverty and give them a fighting chance. cope with climate change.

“A severe debt crisis is unfolding in developing economies, and the likelihood of a deterioration in the outlook is high,” said the report released on Tuesday.

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The warning comes as the International Monetary Fund and World Bank hold meetings in Washington this week amid growing concerns over the global recession and a series of debt crises from Sri Lanka and Pakistan to Chad, in Ethiopia and Zambia.

UNDP Administrator Achim Steiner called for a range of measures including debt cancellation, providing broader relief to more countries and even adding special clauses to bond contracts to provide respite during crises.

“There is an urgent need for us to step up and find ways to address these issues before they become at least less manageable and possibly unmanageable,” he told reporters.

People wait their turn at the Aluche Mutual Support Network, where hundreds line up every Saturday to receive basic necessities amid soaring inflation and rising consumer prices, in the neighborhood d’Aluche in Madrid, Spain, September 24, 2022. REUTERS/Violeta Santos Moura

Without effective debt restructuring, poverty will increase and desperately needed investments in climate change adaptation and mitigation will not take place.

The UNDP report also called for a recalibration of the G20-led Common Framework – the plan designed to help countries in financial difficulty due to the COVID-19 pandemic to restructure debt. Only Chad, Ethiopia and Zambia have used it so far.

His proposal was to widen the eligibility of the Common Framework so that all heavily indebted countries could use it rather than the 70 or so poorest countries, and that all debt payments would be automatically suspended during the process.

“Both will incentivize creditors to participate and maintain a reasonable lead time, and it could also remove some of the hesitation caused by debtor country rating fears,” the report said.

He also recommended that creditors have a legal obligation to cooperate “in good faith” in restructurings of a common framework and that countries can offer to take environmentally friendly measures to encourage creditors to reduce their debt.

“That makes a lot of sense,” the report says. “Not only have these countries contributed the least to climate change, they are bearing the highest cost.”

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Reporting by Marc Jones Editing by Raissa Kasolowsky

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Robert P. Matthews