“The international community should urgently take more steps to relieve the mounting financial pressure that debt payments are exerting on developing countries as they get to grips with the economic shock of COVID-19,” said UNCTAD Secretary General Mukhisa Kituyi while releasing the report titled ‘From the Great Lockdown to the Great Meltdown.’ The world is facing an unprecedented health and economic emergency due to the novel coronavirus disease, said the report. It is the developing countries, however, that will be the most affected with a wall of debt service repayments throughout the 2020s.
In 2020 and 2021 alone, repayments on their public external debt are estimated to be nearly 3.4 trillion dollars — between 2 trillion and 2.3 trillion dollars in high-income developing countries and between 666 billion and 1.06 trillion dollars in middle and low-income countries.
The financial turmoil from the crisis has triggered record portfolio capital outflows from emerging economies and sharp currency devaluations in developing countries, making servicing their debts more onerous, said the report.
The countries will face a hard time repaying the debt in time — the crisis will trigger record portfolio capital outflows from emerging economies and sharp currency devaluations in developing countries, according to the report.
“Recent calls for international solidarity point in the right direction,” said Richard Kozul Wright, Director of UNCTAD’s Globalisation Division that produced the report, “but have so far delivered little tangible support for developing countries as they tackle the immediate impacts of the pandemic and its economic repercussions.” The reports called for automatic temporary standstills, debt relief and programmes restructuring, and an international developing country debt authority to provide macroeconomic ‘breathing space’ for all crisis-stricken developing countries.
On March 30, UNCTAD called for a 2.5 trillion dollars coronavirus crisis package for developing countries. Even prior to the COVID-19 crisis, many of these countries faced high and rising shares of their government revenues going to debt repayments, squeezing health and social expenditures.