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Debt crisis!


United Nations Secretary General Antnio Guterres yesterday said that by ignoring several warnings from the global body since the start of the novel coronavirus pandemic, a year ago, the world is now experiencing the worst recession in nine decades.

Guterres made the assertion during a virtual meeting and press briefing as the UN welcomed a new initiative being explored jointly by prime ministers Andrew Holness of Jamaica and Pierre Trudeau of Canada to rescue some of the most vulnerable countries from the recession.

Guterres said the exercise was geared at the enterprises which have the greatest interest in the poorest people in the most vulnerable countries. However, the impact would not stop there, as it cannot be confined to any region or category of country, and there have been forecasts of losses of global output running into trillions of dollars, he added.

“The UN has been warning of these crises since the start of COVID a year ago. Unfortunately, not enough has been done to support those countries. We are already into the worst global recession in 90 years,” he stated.

“We cannot walk with eyes wide open into a debt crisis that is foreseeable and preventable,” he said, noting that many developing countries are facing financial constraints, meaning that they cannot even invest in their own recovery and resilience.

“Nor can they access the vaccines that provide the fastest route out of the pandemic,” he stated, pointing out that lack of access to the vaccines was creating inoculation gaps that would affect everyone in developing economies.

Guterres said developing countries urgently need access to liquidity to respond to the pandemic and to invest in a sustainable and inclusive recovery. As such, the UN was calling for urgent, bold and decisive action.

He also paid tribute to Holness and Trudeau, whom he described as “vital partners in the process”, for their efforts to gain support for policies to assist developing and middle-income economies, including the use of the special drawing rights, which the International Monetary Fund (IMF) has relied on to support developing and middle-income economies affected by the pandemic.

However, he said there was a need for bolder steps in terms of the three-phase approach a moratorium on debt payments; targeted debt relief; and reform of the international debt architecture which the UN has been advocating from the start of the problem.

In his brief presentation, Holness said he welcomed the interest of the G20 group to establish a Debt Service Suspension Initiative (DSSI), which was extended to 2021.

“However, we urge that it be further extended to at least the end of this year and, ideally, to the end of 2022,” he said.

Holness also noted that, while there is recognition that low-income countries are high-risk, it must be understood that there are also middle-income countries with high risks.

“Whether they too fall into distress depends on the debt and the impact of the pandemic. Small island developing states, which are heavily reliant on tourism and remittances, are particularly vulnerable,” the Jamaican prime minister said.

He called for an expansion of the DSSI to include vulnerable middle-income economies, as private creditors play a more prominent role in relation to sovereign debt issued by developing countries.

He said there was a need to engage the credit rating agencies, as well, within the context of the deliberations, to get countries to lose the fear of seeking loans to finance their recovery.

Trudeau noted that several countries had already defaulted on their debt, and a significant number of emerging economies were facing serious fiscal challenges while many other developing countries were in “debt distress”.

“We must learn from this crisis and together set ourselves on a better path,” Trudeau said.

He noted that last year’s meeting with Holness has borne fruit in 2021, as he has been working with the Jamaican prime minister to define the stocks which, he said, would be continued as increasing global liquidity; extending and expanding the scope of debt relief; and, carrying out debt relief reforms as well as addressing eligibility for international aid.

“Our conversations today will also inform the important discussions that will take place in the forthcoming spring meetings of the IMF, and the World Bank, and within the G20 and G7 groups,” Trudeau stated.

“Canada wants to find real solutions that will help everyone, including the most vulnerable in this world, to recover from the crisis,” he said.

Two other Caricom leaders Barbados Prime Minister Mia Mottley, who is also the current chair of the regional body; and Prime Minister Gaston Browne of Antigua and Barbuda also spoke at the meeting.

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