UN Secretary-General Antonio Guterres has called for debt relief extension for middle-income countries, which account for more than half of the world body’s 193 member states, to recover in the wake of the global Covid crisis.
“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 said while addressing a General Assembly high-level meeting on Thursday.
He said that middle-income countries should have their debts suspended into 2022 to cope with the social and economic impact of the ongoing pandemic.
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. 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,” he stated.
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.
The list includes India, which has a population of more than 1 billion, and Palau, an archipelago in the Pacific with less than 20,000 people.
Besides population size, these countries also vary in economic activity, geography, and income levels per capita, which range from $1,000 to $12,000 annually, meaning they often exceed per capita income thresholds for debt relief.
Guterres stressed 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.”
Last year, the G20 leading economies announced a debt service suspension initiative that allows the world’s poorest countries to temporarily halt bilateral credit payments.