Warning ‘Time Is Up for 3.3 Billion People’, Secretary-General Urges Deep Financial System Reforms to tackle Unfolding Public Debt Crisis, at Report Launch
Following are UN Secretary-General António Guterres’ remarks to the launch of “A World of Debt” report, in New York today:
Half our world is sinking into a development disaster, fuelled by a crushing debt crisis. That is the main message of the report we are presenting today: A World of Debt. Some 3.3 billion people — almost half of humanity — live in countries that spend more on debt interest payments than on education or health. And yet, because most of these unsustainable debts are concentrated in poor countries, they are not judged to pose a systemic risk to the global financial system.
This is a mirage. 3.3 billion people is more than a systemic risk. It is a systemic failure. Markets may seem not be suffering yet, but people are. Some of the poorest countries in the world are being forced into a choice between servicing their debt or serving their people. They have virtually no fiscal space for essential investments in the Sustainable Development Goals or the transition to renewable energy.
Levels of public debt are staggering — and surging. In 2022, global public debt reached a record $92 trillion. Developing countries shoulder a disproportionate amount. A growing share is held by private creditors who charge sky-high interest rates to many developing countries. On average, African countries pay four times more for borrowing than the United States and eight times more than the wealthiest European countries.
The International Monetary Fund (IMF) says 36 countries are on so-called “debt row” — either in, or at high risk of, debt distress. Another 16 are paying unsustainable interest rates to private creditors. A total of 52 countries — almost 40 per cent of the developing world — are in serious debt trouble.
It is one result of the inequality built into our outdated global financial system, which reflects the colonial power dynamics of the era when it was created. The system has not fulfilled its mandate as a safety net to help all countries manage today’s cascade of unforeseen shocks: the pandemic, the devastating impact of the climate crisis and the Russian [Federation] invasion of Ukraine.
Debt is an important financial tool that can drive development and enable Governments to protect and invest in their people. But, when countries are forced to borrow for their economic survival, debt becomes a trap that simply generates more debt.
Today’s report is our most detailed picture yet of this unfolding debt crisis, with a wealth of comparisons and context. It also sets out our road map to global financial stability — a road map already put forward in our Policy Briefs on reforms of the Global Financial Architecture and the Sustainable Development Goal (SDG) Stimulus.
Deep reforms to the global financial system will not happen overnight. But, there are many steps we can take right now. Our proposals include an effective debt workout mechanism that supports payment suspensions, longer lending terms, and lower rates, including for vulnerable middle-income countries.
Governments can agree right now to scale up development and climate finance by increasing the capital base and changing the business model of multilateral development banks. They can enable much stronger coordination between the banks, to transform their approach to risk without losing their AAA credit rating, so that they can massively leverage private finance at affordable cost to developing countries.
The Bridgetown Agenda led by Prime Minister Mia Mottley of Barbados and the recent summit hosted by President [Emmanuel] Macron of France generated other important proposals. The upcoming Group of 20 Summit is an opportunity to take these ideas forward.
Action will not be easy, but it is essential and urgent. Today’s report shows that time is up for 3.3 billion people.