UN Secretary General Antonio Guterres has warned of “frequent debt defaults” this coming year as poor and middle-income countries are denied access to the finance and investment they need to dig themselves out of the effects of the Covid-19 pandemic.
Addressing the UN’s 193 members on his new year priorities, the UN chief called for more vaccine sharing, climate action and said that “record inflation, soaring energy prices and extortionate interest rates could lead to frequent debt defaults in 2022”.
Six nations — Argentina, Belize, Ecuador, Lebanon, Suriname and Zambia — have defaulted on their debts since the start of the pandemic. Mr Guterres said many more economies may follow suit and tank this year without a reboot of global finance rules.
“The divergence between developed and developing countries is becoming systemic — a recipe for instability, crisis and forced migration,” Mr Guterres told the UN General Assembly in New York on Friday.
“These imbalances are not a bug … they are the product of a system that routinely ascribes poor credit ratings to developing economies, starving them of private finance.”
Credit ratings agencies such as Moody's, Standard & Poor's and Fitch were the “de facto decision-makers” in global finance whose scorecards determine which countries are too risky for investment. They must be more “accountable and transparent”, he said.
The UN secretary general pointed to Africa, which is projected to report economic growth in the next five years that is 75 per cent less than in the rest of the world. Illicit financial flows drain the continent of more than $88 billion each year, he added.
He praised the International Monetary Fund’s approval in August of a $650bn allocation of Special Drawing Rights (SDRs) — the fund's unit of exchange backed by dollars, yuan, euros, yen and pounds sterling.
Still, the “vast majority of those SDRs went to the biggest and richest economies that need them least”, he said, calling for a funding “redistribution” to prop up economies that are teetering on the brink of collapse.
He also took aim at Elon Musk, Jeff Bezos, Mark Zuckerberg and some of the world’s other richest tycoons, who, according to the UK charity Oxfam, saw their wealth double during the pandemic while millions of others were tightening their belts.
He called for an “inclusive and transparent” rewrite of lending rules and a “fairer global tax system, in which some of the trillions amassed by billionaires during the pandemic are shared more broadly”.