The UN Trade and Development Conference (UNCTAD) published its latest Trade and Development Report Update, which finds that global growth is expected to be lower than earlier projected. This signals a potential economic downturn, which, in combination with mounting debt and insufficient international support, puts developing countries at risk of facing “another lost decade.”
The report, which outlines global trends and prospects, flags that developing countries are looking at projected USD 800 billion in foregone income. While declining energy costs are slowing inflation down, it warns that elevated food prices mean the cost of living remains high in many developing countries. The report also points to “growing global asymmetries” that are threatening developing countries’ resilience. To address these challenges, UNCTAD calls for “stronger multilateral action and an urgent focus on sovereign debt architecture.”
The report finds that in 2022, 81 developing countries lost USD 241 billion in international reserves, which represents an average decline of 7%, with more than 20 countries experiencing a decrease of over 10%, “in many cases exhausting their recent addition of Special Drawing Rights.” Special Drawing Rights (SDRs) are “an international reserve asset created by the International Monetary Fund (IMF) to supplement the official foreign exchange reserves of its member countries and help provide them with liquidity.” According to a UN News story, the IMF allocated USD 650 billion worth of SDRs in August 2021 to support countries through the COVID-19 pandemic. This was the largest SDR allocation ever to take place.
At the same time, in 2022, borrowing costs grew from 5.3% to 8.5% for 68 emerging markets. Today, 39 countries’ credit payments exceed “what they received in new loans,” and 62 countries’ expenditure on external public debt service is greater than what they spend on healthcare. Meanwhile, “the balance due to meet the SDGs keeps rising.”
Stressing the need for strengthening the financial multilateral agenda to support developing countries, achieve the SDGs, and build a more prosperous and sustainable future, the report calls for focus on the reform of the debt architecture and the establishment of:
- A multilateral debt workout mechanism;
- A registry of validated data on debt transactions from both lenders and borrowers; and
- Improved debt sustainability analyses that align “with delivering on the SDGs and tackling climate change.”
Issuing at least USD 650 billion worth of new SDRs “would [also] be a positive first step in helping to alleviate the heavy debt burdens that hinder development prospects,” according to the report.
The report contributes to discussions at the IMF/World Bank Spring Meetings, taking place in Washington, D.C., US, from 10-16 April 2023. [Publication: Trade and Development Report Update: Global Trends and Prospects: April 2023] [UNCTAD Press Release] [UN News Story]
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