According to the United Nations, the world is facing a “systemic failure” that poses a risk to the global financial system. The organization’s Secretary-General, Antonio Guterres, highlighted the issue as global public debt reached an unprecedented level of $92 trillion last year. Developing countries have shouldered a disproportionate amount of this debt, with almost 30% of the total owed by these nations.
A new report released by the UN Global Crisis Response Group reveals that since 2000, world public debt has increased more than fivefold, surpassing the growth of global GDP, which tripled over the same period. This alarming trend indicates an unsustainable level of debt across the globe, leading to a dire situation for many developing countries.
The report also sheds light on the impact of this debt crisis on the population. According to the calculations presented, approximately 3.3 billion people, nearly half of the world’s population, live in countries that spend more on debt-interest payments than on education or health. This puts a significant strain on the development and well-being of these nations.
Secretary-General Guterres attributes this crisis to the “inequality built into our outdated global financial system.” The report reveals that African countries face borrowing costs four times higher than the United States and eight times higher than the wealthiest European economies. Such disparities further exacerbate the debt burden for developing nations, perpetuating a cycle of economic instability.
To address this pressing issue, the UN Global Crisis Response Group proposes several measures outlined in their report titled “A World of Debt.” These measures include implementing a debt workout mechanism that supports payment suspensions, longer lending terms, and lower interest rates. These initiatives aim to alleviate the debt burden on developing countries and provide them with a more sustainable path towards economic growth and development.
The release of this report coincides with an upcoming meeting of finance ministers and central bank governors of the G20 member nations. Scheduled to take place in India from July 14 to 18, the meeting will discuss various issues, including the treatment of countries under the Common Framework. The Common Framework is a G20 initiative launched in 2020 to assist poor nations in delaying debt repayments. The findings of the UN report will likely be part of the discussions at this important gathering of global financial leaders.
In conclusion, the United Nations has sounded the alarm on the escalating global debt crisis, particularly its impact on developing countries. The report highlights the need for urgent action to address this systemic failure, as the current financial system poses risks to the stability of the world economy. The proposed measures in the report provide a roadmap towards a more equitable and sustainable approach to managing global debt, with the hope of mitigating the adverse effects on the world’s most vulnerable populations. The upcoming meeting of G20 finance ministers and central bank governors presents an opportunity for international collaboration in finding viable solutions to this pressing issue.