GENEVA:
Developing countries need urgent action to help manage their debt followingthe food and fuel price surges triggered by the war in Ukraine, a top UNofficial told AFP.
The Covid-19 pandemic has already reduced developing countries’ financialleeway and increased their debt, said Rebeca Grynspan, secretary-general ofthe United Nations Conference on Trade and Development (UNCTAD), whichhelps developing countries integrate into the global economy.
“On top of what we already had, how to face the rise in prices of fuels, offood and fertilisers? That’s a very difficult problem. Many countries arealready feeling it,” she told AFP in an interview.
The cost of freight has shot up by 34 percent since Russia invaded Ukraineon February 24, according to UNCTAD.
Transportation issues and global supply chain disruptions are also drivingup costs and prices.Developing countries will not be able to cope without help and needsolutions for their liquidity and debt problems, said Grynspan.
“We need a better mechanism for debt restructuring and debt relief,” theformer vice president of Costa Rica said, calling for the issue to bediscussed in the G20, and at the World Bank and International Monetary Fund(IMF) meetings next month.
UNCTAD says developing countries are expected to need $310 billion toservice external public debt in 2022, equivalent to 9.2 percent of theoutstanding stock of external public debt at the end of 2020.
It said Angola, Egypt, Mongolia, Pakistan and Sri Lanka were amongcountries that appear vulnerable to seeing their economies ground to a haltdue in part to towering debt servicing levels.
The IMF announced last week that Egypt would seek financial support fromthe institution.
Grynspan denounced the enormous pressure that debt servicing places ondeveloping countries.”After the Second World War, when support was being given to Germany, itwas established that Germany wouldn’t be able to pay in debt service morethan five percent of their export earnings,” she said.
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By comparison, debt servicing has now reached 15 percent of export earningsin the least-developed countries, and 34 percent in small island developingstates.
“These are countries that are under huge stress,” said Grynspan.
The economist, who is the first woman to lead UNCTAD, called for asuspension of debt servicing for low-income countries, as had been the caseduring the pandemic until the end of 2021.
“We need to renew the debt suspension initiative for the low-incomecountries. We have to do that quickly. If not, they will be unable to paytheir debts,” she said.
She also called for a surge in funding granted to multilateral developmentbanks, including regional development banks, for them to provide increasedsupport to low-income states.
Coordinated action is urgently needed, said Grynspan, to avoid Russia’s warin Ukraine triggering a “domino effect” of crises in debt, hunger and theglobal financial architecture.
Net food importers will suffer the most from the economic repercussions ofthe war, according to UNCTAD, which lists 36 countries as highly dependenton wheat imports from Ukraine and Russia — mostly in Africa and the MiddleEast.
“The world has the necessary amount of food, of fuels, of fertiliser, offinancing to face this crisis in the developing countries,” Grynspan said.
“The problem is distribution.” – APP/AFP
