(CMC) — United Nations Secretary-General António Guterres has called for debt relief extension for Caribbean and other middle-income countries, saying that innovative measures to address debt are required to help the world’s more than 100 middle-income countries expand their economies and exit the COVID-19 pandemic.
In addressing a high-level UN General Assembly meeting on these nations, which account for more than half of the UN’s 193 member-states, Guterres underlined the need for financing to help them recover in the wake of the global crisis.
He said that middle-income countries should have their debts suspended into 2022 to cope with the social and economic impact of the virus.
The UN Secretary General said many were already dealing with mounting debt before the pandemic, “which has only further aggravated the situation.
“In small island states, for example, the collapse of tourism has greatly hindered their capacity to repay debts,” he said. “And while the global response to the debt crisis is rightly attempting to support low-income countries, middle-income countries must not be left behind.”
The UN said diversity defines the world’s middle-income countries, which were already home to some 62 per cent of the world’s poor prior to the pandemic.
Besides population size, the UN said these countries also vary in economic activity, geography and income levels per capita, which ranges from US$1,000 to US$12,000 annually, meaning they often exceed per capita income thresholds for debt relief.
Guterres stressed the need for better mechanisms and international cooperation to address what he characterized as their mounting and unsustainable debt levels.
“Even if these countries manage to avoid default, they will see long-lasting limitations on critical government spending on a variety of development and climate objectives in the years to come”, he warned.
Guterres underscored the need for “a new debt mechanism” that includes debt swaps, buy-backs and cancellations.
“This is the moment to tackle long-standing weaknesses in the international debt architecture, from lack of agreed principles, to restructurings that provide too little relief, too late,” he said.
“Innovative instruments to allow debt restructuring and meaningful debt reduction can help middle-income countries expand their fiscal space to boost investment, and steer a resilient and sustainable recovery from the crisis,” Guterres added.
In March, he convened world leaders for a meeting to bolster support for action to stave off the debt crisis in developing countries, including those in the Caribbean.
The UN chief said he was encouraged to see growing recognition around the need for new Special Drawing Rights (SDRs), a type of foreign reserve asset developed by the International Monetary Fund (IMF).
However, he said unused SDRs must be re-allocated to support vulnerable nations, including middle-income countries.
Last year, the Group of 20 (G20) leading economies announced a debt service suspension initiative, which allows the world’s poorest countries to temporarily halt bilateral credit payments.
Guterres said the measure should be extended into 2022 and “made available to highly indebted, vulnerable middle-income countries that request it.”