According to a new report by the United Nations, the COVID-19 pandemic is threatening the fight against poverty and increasing global inequality. In its chapter on debt relief, the text refers to our proposal.
Only immediate action can prevent a lost decade for development for many countries, the Financing for Sustainable Development Report 2021 reads. Roughly half of the least developed and other low-income countries were at high risk or already overindebted prior to the pandemic. Due to falling tax revenues, the pandemic has pushed the debt up into dangerous heights – threatening the achievement of the Sustainable Development Goals.
To overcome the crisis situation, the report urges immediate action from governments, including:
- Reject vaccine nationalism and step up contributions to the “Access to COVID-19 Tools Accelerator” to close the remaining funding gap of over $20 billion for 2021;
- Meet the 0.7% “Official Development Assistance” (ODA) commitment and provide fresh concessional financing for developing countries, especially LDCs;
- Avert debt distress by providing liquidity and debt relief support so developing countries can fight COVID-19 and its economic and social fallout.
In the course of the latter claim, the report refers to the DRGR-proposal as a tool to address solvency concerns in highly indebted countries:
“Outright debt cancellations of official debt could be considered for the most vulnerable countries. The IMF has provided relief to the 29 poorest developing countries through the donor-funded CCRT, providing grants that effectively cancel debt repayments through April 2021. With sufficient donor funding, these types of trust-funded multilateral initiatives could be expanded. Debt cancellation done bilaterally would partially count as official development assistance (ODA) under updated Development Assistance Committee rules (see chapter III.C). One proposal is to provide comprehensive debt relief on official debt in return for commitments in investments in health and social spending, and climate action, building on experiences of the HIPC Initiative / Multilateral Debt Relief Initiative (MDRI).16″
In the further course of the text, the crisis is highlighted as a unique opportunity for sustainable investment. In the spirit of the DRGR idea, it states: “It would create growth; allow better life for millions; and combat climate change.”
Read the whole report here.