UN Report Urges Immediate Action as Global Debt Crisis Hits Record High

UN Report Urges Immediate Action as Global Debt Crisis Hits Record High
UN Report Urges Immediate Action as Global Debt Crisis Hits Record High

According to the latest United Nations report titled “A World of Debt,” the global debt crisis has reached unprecedented levels, demanding immediate action. Released data shows that global public debt skyrocketed to an astonishing $92 trillion in 2022, with developing nations accounting for 30% of this colossal sum. Secretary-General Antonio Guterres warns that 52 countries, constituting approximately 40% of developing economies, are currently grappling with severe debt challenges, significantly impeding their ability to invest in critical sectors like education and healthcare.

Secretary-General Guterres stresses that the global financial system has failed to fulfill its role as a safety net, leaving countries vulnerable to unexpected shocks such as the COVID-19 pandemic, climate change impacts, and conflicts. He highlights the urgent need for multilateral action to combat the debt crisis effectively.

The UN report underlines several crucial measures proposed to address the crisis. These include tackling the exorbitant cost of debt and the escalating risk of debt distress. Additionally, the report calls for a substantial increase in affordable long-term financing for development and the expansion of contingency financing for countries in dire need.

The burden of the global public debt falls heavily on developing countries, with China, India, and Brazil accounting for 70% of their share. Moreover, a staggering 59 developing nations face a debt-to-GDP ratio exceeding 60%, indicating alarmingly high levels of debt.

Private creditors, including bondholders and banks, hold a significant portion of developing countries’ external public debt, amounting to 62% of the total. In Africa, private creditor participation has surged from 30% in 2010 to 44% in 2021, while Latin America faces the highest ratio of private creditors, representing 74% of external government debt in the region.

To address the crisis, the UN urges multilateral lenders to expand their financing efforts. Specific proposals include temporarily suspending International Monetary Fund (IMF) surcharges and providing increased access to financing for countries facing debt distress.

The report also highlights the need for an improved debt workout mechanism to expedite progress under the G20 Common Framework. This framework, established in October 2020, aims to involve non-Paris club members, such as China, in debt relief efforts. However, further details regarding the proposed debt treatment mechanism are yet to be provided.

The UN emphasizes that the current international financial architecture fails to offer adequate and affordable financing options for developing countries. For 50 emerging economies worldwide, net interest debt payments surpass 10% of their revenues, further exacerbating their already burdensome debt load.