ISLAMABAD: The United Nations Conference on Trade and Development on Thursday proposed the creation of an international developing country debt authority mandated to oversee the implementation of comprehensive temporary standstills as well as case-by-case longer-term debt sustainability assessments and consequent sovereign debt relief and restricting agreements.

This could follow the path of setting up an autonomous international organisation by way of an international treaty between concerned states. Essential to any such international agreement would be the swift establishment of an advisory body of experts with entire independence of any creditor or debtor interests.

The UNCTAD report ‘From the Great Lockdown to the Great Meltdown: Developing Country Debt in the Time of Covid-19’ set out urgent measures needed to head off a looming debt disaster in developing countries reeling from the economic fallout from the coronavirus pandemic.

According to the report, developing countries now face a wall of debt service repayments throughout the 2020s. In 2020 and 2021 alone, repayments on their public external debt are estimated at nearly $3.4 trillion — between $2tr and $2.3tr in high-income developing countries and between $666 billion and $1.06tr in middle- and low-income countries.

The coronavirus pandemic hits developing economies at a time when they had already been struggling with unsustainable debt burdens for many years, as well as with rising health and economic needs.

Of utmost importance, in responding to both the Covid-19 shock to developing country sovereign external debt positions as well as to the fragility of such positions even prior to the Covid-19 shock is coordinated debtor country action to pro-actively shape future international agendas and agreements on developing country debt relief and restructurings.

These have long failed to address the need for comprehensive, substantive and game-changing ways forward to deal fairly and efficiently with heavy and growing public debt service burdens across developing countries, precipitated by speculative and volatile international net portfolio capital flows from developed countries.

Both developing country debtors as well as developed nations’ creditors should make it a priority to safeguard and promote future mutual dealing to shared longer-term benefit on equal terms in the wake of Covid-19 crisis, report says.

The report says that developing countries will require massive liquidity and financing support to deal with the immediate fall-out from the pandemic and its economic repercussions. As both UNCTAD and the IMF have estimated, these liquidity and financing needs amount to at least $2.5tr. Clearly, debt relief measures will cover only a part of these needs, with new allocations of Special Drawing Rights and a grant-based ODA Marshall Plan to support health and social expenditures providing faster avenues to deliver urgently needed cash injections.

Published in Dawn, April 24th, 2020