UN trade body warned of a looming debt disaster in developing countries due to the economic fallout from the pandemic and called for a global debt deal. The United Nations Trade and Development (UNCTAD) released a report that underlined the vital need for a decisive action to provide substantial debt relief to developing countries. It added that calls for international solidarity have so far delivered little tangible support.
“The international community should urgently take more steps to relieve the mounting financial pressure that debt payments are exerting on developing countries as they get to grips with the economic shock of COVID-19,” said UNCTAD Secretary-General Mukhisa Kituyi in a statement.
In the report titled ‘From the Great Lockdown to the Great Meltdown: Developing Country Debt in the time of COVID-19’, UNCTAD said that COVID-19 has hit developing economies at a time when they had already been struggling with unsustainable debt burdens for many years. The UN agency highlighted that the developing countries cannot easily flatten the curve by closing down their largely informal economies without facing more deaths due to starvation than COVID-19.
The report noted that the developing countries’ repayments on their public external debt alone will soar to between $2.6 trillion and $3.4 trillion in 2020 and 2021. It proposed the establishment of an International Developing Country Debt Authority (IDCDA) to oversee the implementation of debt relief programmes.
Earlier on March 30, the UN body had called for an urgent $2.5 trillion aid package to help developing countries avoid worst-case scenarios due to the pandemic, predicting a drop of $2 trillion to $3 trillion overseas investment in commodity-rich exporting countries. It said that the combined effect of COVID-19 pandemic and global recession will be catastrophic for developing countries, impacting the progress towards Sustainable Development Goals.
UNCTAD had published a report on March 30 highlighting the economic shock to developing countries due to the health pandemic and advocated for a “whatever it takes” programme. It had proposed a four-pronged strategy to minimise the economic shock in the wake of the coronavirus crisis and called for a conversion of international solidarity into concrete action.