Running on Empty, Small Island States Need Debt Relief, Greater Say in International Financial Institutions, Secretary-General Tells Resource Mobilization Meeting

Following are UN Secretary-General António Guterres’ remarks at the opening of the High-level Meeting on Mobilization of Resources for Small Island Developing States (SIDS), in Antigua and Barbuda today:

I am happy to join you today.  As I said yesterday, financing is the fuel of development.

But the truth is that many small island developing States are running on empty.  Suffering the impact of the COVID-19 pandemic and of the Russian invasion of Ukraine, which accelerated inflation and increased interest rates.  Battered by a climate catastrophe they did not create. With shocks that are becoming more and more frequent — and devastating.  Causing nearly $100 billion in losses for SIDS between 2010 and 2019.

SIDS face even greater challenges to achieve the Sustainable Development Goals than the rest of the world.  Too often, island nations are unable to make the investments they need in sustainable development — as precious resources are diverted to recovery from disasters and to debt service.  And when they turn to the global financial system for assistance, they come, often, empty-handed.

As a result, many SIDS have been forced to take on high levels of debt.  SIDS are paying more to service debt than they invest in health care and education, in a large number of cases.

And while many SIDS rely on official development assistance (ODA), that remains comparatively low.  Two thirds of SIDS are classified as middle-income countries — with limited or no access to debt support or concessional financing.

As the impacts of climate change have intensified, the financing gap in SIDS has become more urgent.  SIDS are doing everything they can.

Prime Minister Gaston Brown of Antigua and Barbuda has been at the forefront of advocacy to develop a Multidimensional Vulnerability Index that truly reflects SIDS needs for development finance, and let’s hope that this will become a reality and be implemented mainly by the international financial institutions.  Prime Minister Mia Amor Mottley of Barbados has spearheaded the Bridgetown Initiative to transform lending and provide inclusive, resilient finance to countries facing climate crises.

And under Samoa’s leadership, the Alliance of Small Island States has been instrumental in pushing the international community to operationalize the loss and damage fund.

You are leading by example.  But too often, you are facing closed doors — from institutions and systems that you had no hand in creating… have little voice in shaping… and that remain too often unresponsive to your needs.  In current form, the global financial architecture fails to deliver for developing countries in general — and SIDS in particular.

I have called for an immediate SDG Stimulus to scale up resources for developing countries and provide effective debt relief.  But it’s clear that deeper reforms are needed.  We need action on three fronts to better support and mobilize financing for SIDS to meet their needs and ambitions.

First, we must relieve the burden of debt.  Many small island developing States find themselves trapped in a vicious cycle:  borrowing at high costs — influenced by the biased analysis of credit ratings agencies — and facing climate and financial shocks that make repayment almost impossible. Today, nearly half of SIDS are on the edge or already grappling with unsustainable levels of debt.

For many, the problem is liquidity.  These countries should have access to effective debt relief mechanisms, including the chance to pause debt repayments temporarily while global economic conditions remain difficult — without fearing for their future. And debt service must be compatible with a path to sustainable development.

Second, we must transform lending practices so that they work for SIDS.  Under current rules, many middle- and high-income SIDS cannot access concessional finance from Multilateral Development Banks.  And when they do, they are faced with excessive bureaucratic obstacles.

This must change.  We must lower borrowing costs by changing the rules on concessional finance. That includes taking into account vulnerability to external shocks.  Climate-resilient or state-contingent clauses should become standard in all borrowing — so that countries are given breathing room when they face shocks.  The UN’s Multidimensional Vulnerability Index can play an important role on this.

And third, we need greater inclusivity across international financial institutions.  Global institutions cannot be effective if they are not representative.  SIDS must have a seat at every table, and your voices must be heard.

This is why we have been consistently advocating for the reform of the international financial architecture – so that it corresponds to today’s economic realities and provides an effective safety net for developing countries in distress and in particular for SIDS.

The Summit of the Future in September offers a rare opportunity to move forward on these goals.  I look forward to welcoming heads of State and government to New York.  I urge you to help build momentum around a more sustainable and inclusive financial system.  It is time to turn the tide and create a global financial future that leaves no island nation behind.