Trudeau calls for global response as UN warns of looming debt crisis

·3 min read
Prime Minister Justin Trudeau met with world leaders today to discuss a potential debt crisis in less developed countries.  (Sean Kilpatrick/Canadian Press - image credit)
Prime Minister Justin Trudeau met with world leaders today to discuss a potential debt crisis in less developed countries. (Sean Kilpatrick/Canadian Press - image credit)

Prime Minister Justin Trudeau and other world leaders today called for a coordinated global response to what the United Nations says is a looming international debt crisis caused by the COVID-19 pandemic.

Speaking at a virtual meeting organized by the UN, Trudeau said the pandemic has laid bare economic inequalities within and between countries that can be addressed only through international cooperation.

"The world must come together to protect people, save lives and defeat COVID-19," said Trudeau.

"We know we can't defeat this virus and build back better at home unless all countries have the resources to respond to and recover from this global challenge. Only through a coordinated global response can we address the impacts of the pandemic and create jobs, economic growth and new opportunity for our people and businesses."

The UN says the world needs to take urgent action to help governments in lower-income and middle-income countries gain access to cash and ease their debt burdens — or risk an uneven global recovery.

Six developing countries have defaulted on their debts already since the pandemic began, while 42 others have seen their credit ratings downgraded during that time, according to the UN. At least 120 million people have fallen into extreme poverty during the pandemic, the UN says.

Trudeau co-hosted the meeting alongside Guterres and Jamaican Prime Minister Andrew Holness. Heads of state and government from several countries took part, as did the leaders of international institutions like the International Monetary Fund, the World Bank, the World Trade Organization and the Organization for Economic Co-operation and Development.

The meeting is following up on a series of roundtables held last year to mobilize efforts to spur a post-pandemic economic recovery.

The discussions focused on the need for "bolder and more concrete action" to provide liquidity and address debt vulnerability in developing countries.

UN chief warns of 'a lost decade for development'

In his opening remarks, Guterres said over $16 trillion US in spending by rich countries on emergency support programs helped them avoid a downward economic spiral. The least developed countries, meanwhile, have spent 580 times less per capita on measures to support their populations, he said.

Guterres warned that looming fiscal crises in many less developed countries threaten to stifle their economic recovery, which could derail progress on both the UN sustainable development goals and the Paris climate change agreement.

"We face the spectre of a divided world and a lost decade for development," Guterres said.

United Nations Secretary General António Guterres is calling on the global community to provide support to low-income and middle-income countries that carry high levels of government debt.
United Nations Secretary General António Guterres is calling on the global community to provide support to low-income and middle-income countries that carry high levels of government debt.(Salvatore Di Nolfi/Keystone/The Associated Press)

Guterres called for a moratorium on debt payments, targeted debt relief and reforms to the international debt architecture to provide increased support for countries in need.

He said a G20 initiative that provides for a temporary suspension of debt-service payments owed by poorer countries to richer countries should be extended from June 2021 to 2022. He also called for it to be expanded so that highly indebted middle income countries can also qualify.

Holness said many poorer countries have had to curb public spending in order to continue to meet their debt obligations, even as demand for health services grew.

And Holness warned that an inequitable global COVID-19 vaccination program will lead to an uneven global recovery and a reinforcement of poverty.

"Unless we are prepared to enter into deeper co-operation with fairer, smarter and broader views of our world and common interests, we should temper our expectations that the crisis is nearing its end," Holness said.