Debt Increased by $500 Billion for Developing Countries in First Year of Pandemic
Washington DC – Poor countries will lose a decade of development and face slow economic recovery according to United Nations analysis. Developing countries will lose $12 trillion through 2025 because they lack vaccines and the resources that wealthy countries use to stimulate their economies.
“The economic and health crisis is getting worse in most countries,” said Eric LeCompte, a UN finance expert and head of the religious development group Jubilee USA Network. “Developing countries need vaccines and more resources to confront the pandemic. Without more aid, there is little chance that poor countries can meet development goals."
According to the flagship report from the United Nations Conference for Trade and Development, developing country debt increased during the crisis. From 2019 to 2020, developing country debt increased while sales from their exported products fell.
“Debt relief must move more quickly and must include all developing countries mired in this crisis,” noted LeCompte. "Developing countries that are categorized as middle-income countries, face the worst extreme poverty increases and job losses because of the pandemic. Unfortunately, these countries are currently left out of processes to cut their debts."
The G20 agreed to suspend debt payments for 73 of the poorest countries through December and created a process for the same countries to reduce debt. The G20 Common Framework debt relief process excludes most developing middle-income countries.
The report welcomed the August creation of $650 billion in emergency reserve currency, also known as Special Drawing Rights, to fight the pandemic. At the same time, the UN agency warned that the resources fall short of the current needs of developing countries. More than $230 billion of the reserve funds reached developing countries.
The United Nations report concludes that more aid, debt relief and changes to the financial system are needed for most countries.
“After the 2008 financial crisis world leaders worked on crisis resolution tools to make the financial system more stable. Unfortunately, we failed to implement those tools, the tools that may have limited or prevented the current crisis," stated LeCompte. "Now we face a greater economic crisis and we must implement strong crisis resolution tools to help solve the current crisis and prevent the next one."
UNCTAD members meet on October 3-7, hosted by Barbados, to adopt its next four-year work plan.
Read the 2021 UNCTAD report here.
Read Jubilee USA's statement on the creation of Special Drawing Rights here.