Intensified debt relief could save economies, prevent defaults
Even before the onset of the COVID-19 pandemic, many developing countries were at high risk of debt distress. These risks have now materialized. Help has been extended with partial suspensions of debt service to 76 low-income countries, and the IMF has offered debt service relief to 25 of the poorest countries. But these actions do not cover commercial and multilateral debt. Nor do they protect middle-income countries. More action is urgently needed to avoid defaults.
A new policy brief by UN DESA proposes courses of action for governments and the international community to ensure that people’s lives and well-being are not sacrificed to unmanageable debt repayments.
The brief puts forward options for a full standstill on servicing of all bilateral, multilateral and commercial debt for all developing countries that request it, including middle‑income countries. This could be done through a central credit facility for countries requesting assistance, managed by an international financial institution. The brief does not call for universal forbearance for all middle-income countries, however, as this would risk disrupting their access to financial markets.
Debt payback standstills would grant countries time to devise sustainable debt solutions – to build back better. The brief also lays out alternative proposals for debt relief, noting that debt relief should be part of broader financing and recovery strategies. Such strategies should consider SDG investment needs, which could be channeled through country-led integrated national financing frameworks.
The COVID-19 crisis presents an opportunity for the international community to come together to rethink and strengthen the international architecture for sovereign debt restructuring. The United Nations, which is not a creditor, provides a neutral forum for inclusive dialogue among sovereign debtors and creditors and other stakeholders, to discuss a way forward.
To read the full policy brief, please visit: http://bit.ly/UNDESACovid
Governing in times of crisis
COVID-19 is changing life as we know it. It is also heavily impacting national institutions across the globe, disrupting the regular functioning of state bodies, such as parliaments and justice systems, while at the same time demanding their rapid response. The pandemic has affected whole institutional systems and the way public institutions interact with people. But national and international actors have stepped up to the plate, responding fast to these unprecedented challenges.
While there have been rapid and effective responses by governments, the pandemic has exposed shortfalls in countries’ resiliency to crisis, and in particular in the way the state relates to its people in realizing the values and principles of effective governance. Resiliency and effective governance go hand in hand, and are also key elements of the 2030 Agenda for Sustainable Development.
Against this backdrop, the 19th Session of the Committee of Experts on Public Administrations took place for the first time in a virtual format in May due to the COVID-19 crisis. It focused on how to promote effective governance and institutional reform to accelerate delivery of the SDGs with particular reference to the Covid-19 pandemic response and recovery.
Among the topics discussed were the Principles of Effective Governance, accelerating delivery of the SDGs, government of the future, training and awareness raising for the SDGs, building institutions to promote peace and justice and budgeting for the SDGs.
The Committee noted that the 11 Principles of Effective Governance for sustainable development have been put to test in the pandemic and have proven useful to the future of government. The Committee recognized that many government institutions were not able to advance the SDGs at the desired scale and speed because of a general undervaluing of the public sector, which had impeded effective public administration, resulting in disregard of its public value and its critical role in service delivery. Moreover, silo-thinking continued to hamper the holistic implementation of the SDGs, hindering action to ensure that no one is left behind.
While the COVID-19 pandemic revealed weaknesses in institutional responses, the Committee also pointed to the ability of governments to take extraordinary steps in response, underlining their commitment to achieve the SDGs by 2030. In this regard, the Committee recommended action to recognize essential service workers in the public sector, strengthen public sector capabilities for the SDGs, invest in the future public-sector workforce, expand use of digital technologies and address digital divides, including through public-private partnership, and strengthen local government finance and financial management.
Learn about the work of CEPA here and about COVID-19 and resilient institutions in UN DESA’s new policy briefs here.
Photo by Frederic Koberl on Unsplash