In 2022, global public debt reached a record of US$ 92 trillion. Levels of public debt are staggering and surging, with main criteria laying in debt interest payments than on education and health. There is no fiscal space for the essential investments in sustainable development, their debt and/or to serve their people. It is a systemic failure with 3.3. billion people. Most of these unsustainable debts concentrated in poor countries, they are being forced into a choice between servicing their debt and not to their people. Financial markets may seem ok and not be suffering yet.
A total of 52 countries, almost 40% of the developing world are in serious. Another 16 are paying unsustainable interest rates to private creditors: in/or at high risk of debt distress. The IMF (International Monetary Fund) says 36 countries are on so called ‘debt row’ – either and 8 times more than the wealthiest European countries. On average, African countries pay four times more for borrowing than the United States or developing countries. Developing countries are charged a disproportionate amount by some private creditors.
Today’s report details the picture of this unfolding debt crisis simply by generating more debt. Mr. Guterres reminds us of the attached dangers especially when countries are forced to borrow for their economic survival, debt becomes a trap. He reiterated, “This is the result of the inequality built into our outdated global financial system, which reflects the colonial power dynamics of the era when it was created.” The UN chief added, “that system has not fulfilled its mandate as a safety net to help all countries manage today’s cascade of unforeseen shocks – the pandemic; the devastating impact of the climate crisis; and the Russian invasion of Ukraine.”
Mr. Guterres concluded the report sets out a roadmap to global financial stability, including through an effective debt workout mechanism which supports payment suspensions, longer lending terms, and lower rates, including for vulnerable middle-income countries. He is optimistic the upcoming G20 Summit is an opportunity to take these ideas forward.
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