Debt vulnerability certainly constitutes a global challenge. With the COVID-19 pandemic first, and then the global cascading effects of the Russian aggression on Ukraine and deteriorating conflicts and the climate crisis, this challenge has become even more daunting, especially for Least Developed and Developing Countries, which found themselves trapped between economic recession, limited fiscal space, high cost of borrowing and inflation.
At this critical juncture, and with more Countries in debt distress, we see the risk of widening global divergence and the risk of sovereign debt crises.
At the peak of the pandemic, the G20 agreed an extraordinary Debt Suspension Service Initiative (DSSI) as a short-term measure – which was managed successfully also during the Italian G20 Presidency – which provided some relief, as also recognized by the UN Secretary-General in its SDG Stimulus Policy Brief. Now, we are engaged, particularly within the G20 as well within the International Financial Institutions Boards, on more structural and global financial measures to increase effectiveness, efficiency and impact.
These include very important processes which aimed at achieving objectives that have been recognized at this Forum, such as the Capital Adequacy Framework Review, a key deliverable of the Italian G20 Presidency, which is expected to unleash hundreds of millions of dollars across the MDB system. This process constitutes a very important and action-oriented milestone, to be connected also to the wider promising “Evolution Roadmap” started by the World Bank.
Last February, the G20 Finance Ministers also recognized “the urgency to address debt vulnerabilities in low and middle-income countries” and call to strengthen “multilateral coordination” from all creditors; notably, the G20 has also tasked a G20 Note on the Global Debt Landscape, which will be a very important instrument for further deliberations.
We welcome last week’s “Global Sovereign Debt Roundtable” convened at the Spring Meetings and the first understandings reached on debt sustainability and debt restructuring. We see this as a very important platform to activate urgent measures for debt management, including within the Common Framework.
The creditor landscape has become more diversified, stressing the need for an international financial system that is more adapted to today’s economic realities and better suited to effectively intervene.
The SDG could and should serve as anchors for any debt operation. Any financial resource which can be made available through such operations should certainly be linked and applied to SDG implementation and acceleration.
Among the key elements there are also transparency, governance and better public-private creditor cooperation. We also need a more structured engagement on the debt-fiscal interface and a stronger dialogue with partner countries – way before “debt distress” situations.
I also wish to recall the important role played by the IFI’s also in addressing the food security crisis, with extraordinary resources and shock windows.
To conclude, it is important to ensure consistency and coherence among all existing exercises, processes and institutions, while keeping the sense of urgency and ambition that we all share, that has been underlined by the UN Secretary General as well.
In this regard, the SDG Summit and the High-Level Dialogue on Financing for Development, next September, will be ideal moments to take stock of this agenda here in New York.