UN chief applauds IMF, World Bank measures to address COVID-related debt crises

UN chief applauds IMF, World Bank measures to address COVID-related debt crises

UNITED NATIONS: United Nations Secretary-General Antonio Guterres welcomed the steps announced by the International Monetary and Finance Committee (IMFC) and the World Bank Group Development Committee to address debt crises and other financial distress to economies arising from the Covid-19 pandemic.

In a statement issued via his spokesperson on Friday, the UN chief said developing economies had struggled to secure enough financial resources to cope with the onset of the coronavirus crisis, “let alone to recover from it”, Xinhua news agency reported.

Since the beginning of the crisis, the secretary-general has called for liquidity, the statement continued, through a large issuance of Special Drawing Rights (SDRs) – an instrument created by the International Monetary Fund to help supplement cash reserves – for those most in need, and a reallocation of unused SDRs.

The top UN official has proposed a “three-phased approach to address debt burdens: a debt standstill, targeted debt relief for the most vulnerable, and a reform of the international debt architecture.”

The secretary-general welcomed the IMF committee’s “concrete calls” for a new allocation of SDRs, and voluntary reallocations to countries in need. He said he was encouraged by the support given for the Debt Service Suspension Initiative (DSSI), which has provided 5 billion U.S. dollars in temporary relief for vulnerable countries, and for the Common Framework for Debt Treatments, agreed by the G20 economies.

“Debt standstills and relief must be extended to countries that need it most – including middle income countries, which are home to more than 60 percent of the world’s poor – without creating stigma or compromising their sovereign ratings,” said the statement.

Reforming the international debt architecture is also critical, said the UN chief, noting that a debt crisis amidst the Covid-19 emergency “would put the Sustainable Development Goals out of reach.”

This week’s discussions on the international debt architecture are a major step in the right direction, he added.

The secretary-general called on all countries and institutions to join in a global effort to “rethink the principles underpinning today’s debt architecture, and urged action to “complement existing instruments with more effective debt crisis resolution mechanisms.”

He expressed great encouragement over the IMF’s and World Bank’s emphasis on a sustainable, inclusive, smart and green recovery.

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