LONDON: Half of humanity, around 3.3 billion people, live in countries that spend more on debt servicing than on health, education or social protection, Dennis Francis said on Wednesday. President of the 78th United Nations General Assembly.
Francis highlighted that “the current financial architecture has failed to mobilize the stable, long-term and equitable financing needed to achieve the Sustainable Development Goals.”
This came during the United Nations High-Level Dialogue on Financing for Development in New York, which discussed practical solutions to close the financing gap between developed and developing countries, as around 40 percent of developing countries suffer from serious debt problems.
As a result of this financial divide between the South and the North, developing countries have fallen victim to what UN Secretary-General Antonio Guterres has described as a “debt trap” that hampers development.
“Developing countries face borrowing costs up to eight times higher than developed countries – a debt trap,” he said, adding that “more than 40% of people living in extreme poverty are found in countries facing serious debt problems.
Recognizing the need for urgent action, Guterres said that “a two-speed world of haves and have-nots is already creating a crisis of global confidence.”
The UN chief called for “reforms to the global financial architecture” to address problems of financing sustainable development, a systemic solution welcomed by member states.
“The algorithm of the past no longer works in today’s world,” declared the President of the European Council, Charles Michel, in agreement.
He added: “Financial institutions were established 80 years ago, and 80 years ago many of the current members of the UN were not yet independent. The world has changed and the challenges have changed, which is why our institutions must change too, or risk being left behind in the dust of history.”
Citing the avalanche of debt challenges facing developing countries, Mohammed Al-Jasser, head of the Islamic Development Bank, spoke in his opening speech of the growing difficulties in fiscal space, with poverty, debt stress, environmental challenges and the consequences of the crisis. COVID-19 pandemic all require funding.
Al-Jasser explained that “multilateral development institutions, including mine, are struggling to provide financing,” which, while essential to alleviate the pressures member states face, is not enough .
“We need something much more sustainable from the global community,” he said. “I believe that multilateralism must first be truly restored as the guiding principle of all our operations, because if we act alone we will not have the firepower necessary to bring about significant change in the situation of these countries .”
The head of the Islamic Development Bank pointed out that debt service in some African countries represents around 5.5 percent of their gross domestic product, while only 3.7 percent is spent on education.
“Post-COVID, more than 1.5 million children did not have an education for two years because they had no connection,” he added.
Al-Jasser called for the mobilization of more resources, “particularly on more concessional terms, as 29 of the 57 member states are least developed countries and cannot afford much of the available financing.”
The United Nations High-Level Dialogue on Financing for Development, organized this year under the theme “Financing the SDGs for a world where no one is left behind”, brought together world leaders, heads of international financial institutions and multilateral development banks to discuss measures to be taken. to achieve the SDGs.