Developing country debt authority proposed

Published April 24, 2020
The coronavirus pandemic hits developing economies at a time when they had already been struggling with unsustainable debt burdens for many years. ─ Dawn/File
The coronavirus pandemic hits developing economies at a time when they had already been struggling with unsustainable debt burdens for many years. ─ Dawn/File

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

Now you can follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Fleeting good news
Updated 03 Dec, 2022

Fleeting good news

Indeed, there is no other option to get out of the economic mess we have created in the last few years.
Battle for spoils
03 Dec, 2022

Battle for spoils

THE spectacle playing out inside a London courtroom shines a light on the struggle for control of the assets of the...
CM Bizenjo’s complaint
03 Dec, 2022

CM Bizenjo’s complaint

BALOCHISTAN Chief Minister Mir Abdul Qudoos Bizenjo’s claim that his province is facing a financial crunch due to ...
Wayward ideology
02 Dec, 2022

Wayward ideology

Anyone who claims his legacy for themselves should not treat his words so whimsically.
Progressive stance
02 Dec, 2022

Progressive stance

THE timing of two encouraging developments in the fight against domestic violence in Pakistan could not have been...
China Covid protests
02 Dec, 2022

China Covid protests

PUBLIC protests are rare in China where the People’s Republic maintains order through a strict authoritarian code...