Countries home to half of the world's poorest people are facing a systemic debt crisis that will significantly diminish their ability to fight the impacts of climate change, a UN report warned on Tuesday.
The United Nations Development Programme (UNDP) said rising poverty levels in at least 54 countries – including nearly half of Africa – threatened to spill over into a development crisis that would affect healthcare, food security, energy, as well as climate adaptation plans.
"It is urgent for us to step up and find ways in which we can deal with these issues before they become at least less manageable and perhaps unmanageable," UNDP administrator Achim Steiner told journalists in Geneva.
The UNDP wants wealthy nations and financial institutions to do more to ease the burden for nations in debt distress – including by writing off debt altogether rather than just rescheduling it.
'Most climate vulnerable'
Failure to effectively manage this debt meant that desperately needed investments in climate adaptation and mitigation would never happen, the report warned, adding the affected countries were "among the most climate-vulnerable in the world".
Its release comes as the International Monetary Fund (IMF), the World Bank and G20 countries this week hold talks in Washington in a bid to find solutions to global recession worries as poorer nations bear the brunt of rising living costs.
"The rapid build-up in debt over the past decade has been consistently underestimated," the report said.
Steiner cited “sobering” World Bank and IMF statistics indicating the number of low-income countries who were either in “debt distress” – or risked falling into it – had doubled over the past eight years.
“We shouldn’t wait for either interest rates to drop or for the global economy to tip into recession to act on debt,” Steiner warned.
Unable to borrow
Data shows that 46 of the 54 countries examined in the report had amassed public debt of $782 billion in 2020, while some 19 developing countries were no longer able to access the lending market.
UNDP chief economist George Gray Molina said a third of developing economies had debt of "substantial risk, extremely speculative or default” levels – with the worst-off countries being Sri Lanka, Pakistan, Tunisia, Chad and Zambia.
The UNDP called for an expansion of the G20 Common Framework – a plan intended to ease the burden on countries pushed into financial trouble by the Covid pandemic by helping them restructure their debt obligations.
Both private creditors and commitments from governments were needed to find a workable debt-relief deal, Molina added.
