NEW YORK: Pakistan Ambassador at the United Nations Munir Akram called for an extension in the freeze in official debt service payments by the developing countries beyond June to help those nations recover from the economic impacts of the pandemic.
Speaking at a virtual meeting on International Debt Architecture and Liquidity, Akram, who also heads the UN Economic and Social Council (ECOSOC), recommended expansion of the move to include the most vulnerable nations, including some of the island states.
The G20 debt relief initiative — launched shortly after the start of the pandemic in the spring of last year — has helped 46 of 73 eligible countries defer $5.7 billion in 2020 debt service payments, freeing up funds for countries to fight the pandemic and shore up their economies.
But lack of private-sector participation and countries’ concerns about marring future access to capital markets have limited the success of the debt freeze, which was initially projected to generate some $12 billion in extra liquidity.
The meeting was convened jointly by UN Secretary General Antonio Guterres and Jamaica and Canada prime ministers Andrew Holness and Justin Trudeau, respectively.
The meeting followed-up on a series of meetings taking place since last year to mobilise action to assist the economic recovery from the pandemic.
In April last, Prime Minister Imran Khan became the first leader to call for urgent debt relief for poorer nations. The suspension, extensively covered in international media, brought some “breathing space” to the developing countries.
In his remarks, Akram stressed that several possible mechanisms for debt relief and restructuring including debt deferral, debt buyout, and debt swaps — which have been identified — should be implemented, with the participation of private creditors.
“To ensure sustainable management of developing country debt, it is also essential to review and update the global debt architecture, and various proposals have been put forward including the possibility of creation of a public global rating agency,” he said.
The ambassador also welcomed a suggestion by the International Monetary Fund (IMF) chief Kristalina Georgieva to present a formal proposal by June for a new SDR (Special Drawing Rights) allocation of $650 billion and to also examine the options to reallocate SDRs to support vulnerable and low-income countries.
“The IMF now has ample ‘firepower’ to expand its emergency and recovery support to the developing countries,” Akram said, adding the multilateral development banks, especially the World Bank, were also in a position to expand their emergency lending.
The creation of a Liquidity and Sustainability Facility (LSF) — that would lower governments’ borrowing costs by increasing the demand for their sovereign bonds — to lower interest rates on loans, as proposed by the UN Economic Commission for Africa (UNECA), would be an important instrument to expand developing countries’ access to market capital.
To ensure the transition to a sustainable growth model, Akram called on developed countries to fulfill their promise to mobilise $100 billion on annual basis in climate finance.
“It is also vital to find ways to access the $378 trillion held in private capital to mobilise at least $1 trillion annually in sustainable infrastructure investment. Without sustainable infrastructure, we will not be able to achieve either the SDGs or the climate goals.”
Pointing out that an estimated $178 billion flowed out of the developing countries last year to the developed ones, the ambassador called for specific steps to halt and reverse this bleeding of resources from developing countries.