Following the spikes in food and gasoline prices sparked by the crisis in Ukraine, a top UN official told AFP that developing countries want immediate assistance in managing their debt.
According to Rebeca Grynspan, secretary-general of the United Nations Conference on Trade and Development (UNCTAD), which helps poor nations integrate into the global economy, the Covid-19 pandemic has already lowered developing countries’ financial leeway and increased their debt.
“How do we deal with the surge in fuel, food, and fertiliser prices on top of everything else? That is a difficult challenge to solve. It is already being felt in many nations “In an interview with AFP, she stated.
According to UNCTAD, the cost of freight has increased by 34% since Russia invaded Ukraine on February 24.
Costs and prices are also rising due to transportation challenges and global supply chain interruptions.
According to Grynspan, developing countries would be unable to deal without assistance and will require solutions to their liquidity and debt difficulties.
“We need a better system for debt restructuring and debt relief,” the former Costa Rican vice president said, urging the G20 and the World Bank and International Monetary Fund (IMF) to examine the problem next month.
According to UNCTAD, developing countries will require $310 billion in 2022 to service foreign public debt, which is 9.2% of the outstanding stock of external public debt at the end of 2020.
According to the report, Angola, Egypt, Mongolia, Pakistan, and Sri Lanka are among the countries whose economies are at risk of collapsing due to high debt servicing costs.
Last week, the IMF declared that Egypt would seek financial assistance from the organisation.
Debt servicing puts great strain on emerging countries, according to Grynspan.
“After WWII, when Germany was receiving aid, it was determined that Germany would not be able to pay more than 5% of its export earnings in debt service,” she explained.
In the least-developed countries, debt servicing currently accounts for 15% of export revenues, and in small island developing states, it accounts for 34%.
“These are countries that are in a lot of trouble,” Grynspan remarked.
The economist, who is the first woman to manage UNCTAD, has proposed that debt servicing for low-income nations be suspended until the end of 2021, as it was during the pandemic.
“The debt suspension strategy for low-income nations must be renewed. That must be accomplished fast. They will be unable to pay their bills if this does not happen “she stated
She also urged for an increase in funding for international development banks, including regional development banks, so that they can provide more assistance to low-income countries.
According to Grynspan, coordinated action is urgently needed to avert a “domino effect” of debt, famine, and global financial architecture difficulties as a result of Russia’s war in Ukraine.
According to UNCTAD, net food importers will bear the brunt of the war’s economic consequences, with 36 nations relying heavily on wheat imports from Ukraine and Russia, especially in Africa and the Middle East.
“The globe has enough food, fuel, fertiliser, and funding to deal with this problem in the developing world,” Grynspan stated.
“The issue is one of distribution.”