Debt reduction for developing countries must be part of the response to the post COVID-19 economic situation

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An effective response to the post-Covid-19 economic situation must include significant and broad debt reduction for all developing countries, including vulnerable middle- to high-income states. This was one of the prescriptions put forward by the Secretary-General of CARICOM, Her Excellency Carla Barnett, as she participated in a panel discussion during the UNCTAD XV Global Leaders Summit Dialogue on Inequalities in Barbados on Tuesday 5 October.

Dr Carla Barnett

Speaking on the topic of the discussion “Is the COVID-19 crisis really a game changer?” Dr Barnett further said debt reduction should specifically focus on debt accumulated due to COVID-19-related spending and climate change adaptation.

The CARICOM Secretary General said the meeting provided an opportunity to highlight to the global community the issues and concerns of small island and lowland coastal states (SIDS) as well as to identify some of the measures that could be taken by the international community to support efforts to build resilience and promote sustainable development among SIDS. She pointed out that SIDS experienced a contraction in GDP in 2020 to about three times the global rate.

“We have used funds budgeted for other purposes to meet the health sector’s needs for PPE, medical equipment, testing supplies and vaccines. We transferred funds to cover basic social safety nets. We have reallocated loans and borrowed additional funds. The already high debt burden has increased further, ”said Dr Barnett.

Dr Barnett said that while the G-20 Debt Service Suspension Initiative (DSSI), which allowed developing countries to temporarily suspend debt service payments to their official bilateral creditors had potential, it did not cover all middle to high income developing countries, many of which are SIDS.

“The new debt resulting from the need to deal with the COVID-19 crisis as well as the stock of existing debt will continue to appropriate a significant part of public resources in the repayment of the debt, while strangling investments. essential infrastructure utilities needed for economic rehabilitation, ”said the Secretary-General. said in advocating for debt reduction.

The situation was even more difficult for many SIDS as they cannot access financing from multilateral and bilateral concessional aid due to their relatively high per capita income status.

“With the reality of our vulnerabilities exposed by the Covid and Climate crises, the call for a more appropriate base to determine access to concessional finance takes on great urgency. We must continue to push for the continued development and acceptance of the Multidimensional Vulnerability Index (MVI). The issue of access to concessional resources for development finance and resilience building remains an important priority for CARICOM States, and indeed for all SIDS, ”said Dr Barnett.

She called on the United Nations system to intensify its collaboration with relevant regional institutions, particularly in the Caribbean, the Pacific and the Indian Ocean, in order to make this index a reality. She also called on the IMF, the World Bank and bilateral and multilateral development partners to move away from the “blinders of GDP per capita”. GDP per capita cannot be a measure of development, let alone sustainable development, she added.

Dr Barnett said new policy options to help developing countries need to be worked out, as the traditional policy menu of international financial institutions did not sufficiently take into account the inherent vulnerabilities and weaknesses of these countries. “This policy menu will certainly be inadequate as a foundation for designing stimulus models that can build transformative and resilient economies in the face of global climate change,” she said.

Ahead of COP 26, the United Nations Climate Change Conference scheduled for next month in Glasgow, Scotland, the Secretary General of CARICOM said that for SIDS like CARICOM, 1.5 staying alive is more than a catchy slogan, “It’s an existential reality.” “

“We must therefore focus on the will to push the COP26 to be decisive in order to maintain the paths towards the achievement of the objectives of the Paris Agreement and to translate the commitments into concrete actions on the ground”, underlined Dr Barnett. .

She referred in particular to the pledges made to the Green Climate and Adaptation Funds which, she insisted, must be honored and scaled up to ensure that the most vulnerable can adapt and survive the effects of climate change.

The fifteenth United Nations Conference on Trade and Development, which lasted four days, ended on Thursday.


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