United Nations, July 13: UN Secretary-General Antonio Guterres emphasized the significance of the G20 Summit, to be hosted under India’s presidency, as an opportunity to take decisive action on debt relief and reform the global financial system. Guterres expressed his concern regarding the “crushing debt crisis” affecting countries worldwide.
During the launch of a UN report titled ‘A World of Debt,’ Guterres highlighted that nearly half of humanity, approximately 3.3 billion people, live in countries where debt interest payments exceed investments in education or health. He stressed that the world is facing a development disaster as a result of the severe debt crisis.
Guterres noted that while these unsustainable debts are primarily concentrated in poor countries, they should not be dismissed as posing no systemic risk to the global financial system. He emphasized that 3.3 billion people represent a systemic failure, with markets appearing unaffected while people suffer. He further highlighted the difficult choice faced by some of the world’s poorest countries, forced to prioritize servicing debt over meeting the needs of their citizens.
Although Guterres acknowledged that deep reforms to the global financial system will take time, he outlined several immediate steps that can be taken. These include the establishment of an effective debt workout mechanism to support payment suspensions, longer lending terms, and lower interest rates for vulnerable middle-income countries. He also suggested scaling up development and climate finance by increasing the capital base and changing the business model of Multilateral Development Banks, facilitating stronger coordination among these banks to leverage private finance at an affordable cost for developing countries.
Guterres referenced the Bridgetown Agenda led by Prime Minister Mia Mottley of Barbados and a recent summit hosted by President Macron of France as important initiatives. He highlighted the upcoming G20 Summit as an opportunity to advance these ideas further.
India assumed the presidency of the G20 on December 1, 2022, and is set to host a Global Leaders’ Summit in New Delhi on September 9-10, bringing together over 40 heads of state, heads of government, and international organizations. The summit aims to adopt a G20 Leaders’ Declaration outlining commitments and priorities discussed during ministerial and working group meetings.
With global public debt reaching an all-time high of USD 92 trillion in 2022, immediate action is necessary to address the escalating crisis, particularly impacting developing countries. Guterres stressed the urgent need for comprehensive reform of the international financial architecture, including the debt architecture, to create a more inclusive system empowering developing countries in global financial governance.
The UN emphasized the importance of addressing the high cost of debt and the mounting risk of debt distress, advocating for the establishment of a debt workout mechanism to expedite progress under the G20 Common Framework for Debt Treatment. The organization called for increased liquidity and the expansion of contingency finance to prevent a liquidity crisis from escalating into a debt crisis. Measures such as enhanced use of Special Drawing Rights, temporary suspension of IMF surcharges, and broader access to emergency financing through increased quotas were also proposed.
