The United Nation (UN) Secretary-General António Guterres, has called for the need for financing to help middle income countries recover in the wake of the COVID-19 global crisis.
He insisted that innovative measures to address debt are required to help the world’s more than 100 middle-income countries expand their economies and exit the COVID-19 pandemic.
He made the call while addressing a high-level meeting of the UN General Assembly.
He said that middle-income countries should have their debts suspended into 2022 to cope with the social and economic impact of the virus.
He noted that many countries were already dealing with mounting debt before the pandemic, which has only further aggravated the situation.
The UN Chief reiterated that: “In small island states, for example, the collapse of tourism has greatly hindered their capacity to repay debts. And while the global response to the debt crisis is rightly attempting to support low-income countries, middle-income countries must not be left behind.”
Diversity defines the world’s middle-income countries, which were already home to some 62 per cent of the world’s poor prior to the pandemic.
The list includes India, which has a population of more than one billion, and Palau, an archipelago in the Pacific island with less than 20,000 people.
Besides population size, these countries also vary in economic activity, geography and income levels per capita, which ranges from $1,000 to $12,000 annually, meaning they often exceed per capita income thresholds for debt relief.
While stressing the need for better mechanisms and international cooperation to address what he characterized as their mounting and unsustainable debt levels, Mr. Guterres said: “Even if these countries manage to avoid default, they will see long-lasting limitations on critical government spending on a variety of development and climate objectives in the years to come.”
He, however, underlined the need for “a new debt mechanism” that includes debt swaps, buy-backs and cancellations.
According to him: “This is the moment to tackle long-standing weaknesses in the international debt architecture, from lack of agreed principles, to restructurings that provide too little relief, too late.
“Innovative instruments to allow debt restructuring and meaningful debt reduction can help middle-income countries expand their fiscal space to boost investment and steer a resilient and sustainable recovery from the crisis.”
It would be recalled that in March this year, the Secretary-General convened world leaders for a meeting to bolster support for action to stave off the debt crisis in developing countries.
