It’s a pleasure to participate in the opening of this high-level meeting on middle-income countries.
As a group, middle-income countries are a key presence at the United Nations, accounting for more than one hundred Member States and home to about 70 per cent of the global population.
This means that we can only steer structural transformation of the global economy, fight climate change and accelerate progress on the Sustainable Development Goals if middle-income countries are fully on board.
Middle-income countries are not a monolith. They represent a wide range of income levels, from $1,000 to more than $12,000 per year in per capita income. They also vary in population size, economic activity and geography.
Yet as middle-income countries rise on the income scale, many experience rising labour costs and become unable to compete with lower-cost countries.
At the same time, these countries are squeezed from the other end as they may also be unable to compete in skill-intensive and higher-value-added exports, due to low labour productivity and other institutional and capacity constraints.
The consequence is often a combination of slow growth, stagnant or falling wages and a growing informal economy.
Avoiding this middle-income trap requires consistent and long-term policy measures, taking into account a country’s specific circumstances and development aspirations.
That requires redesigning development strategies and gradually shifting to higher-value-added sectors, with a focus on innovative, sustainable and inclusive growth.
To achieve that goal, middle-income countries need better access to technologies, research and innovation, and also better management practices.
The United Nations system has long played a key role in supporting national development efforts in the middle-income countries.
I am glad to see that the discussions today will also focus on identifying new tools to enhance this support.
Middle-income countries also face varying levels of access to product and financial markets, and diverse social, economic and environmental vulnerabilities.
These vulnerabilities are often overlooked as a result of a false perception that income is the only measure of development.
As the COVID-19 crisis has demonstrated, vulnerable middle-income countries often exceed per capita income thresholds for aid and debt relief. Graduation must be a reward, not a punishment.
This brings me to the devastating impact that the COVID-19 pandemic has had on many middle-income countries.
Before the pandemic, middle-income countries were home to more than 62 per cent of the world’s poor.
COVID-19 – and the disruptions in global trade – has exposed and exacerbated the economic, social and environmental vulnerabilities of many middle-income countries.
In many, it has also amplified structural challenges such as limited healthcare capacities, inadequate education systems and limitations in public administration.
We have to use this moment to build resilience for the future.
While some recovery is under way, many businesses are facing serious questions about how to structure their supply chains to insulate [them] from future disruptions.
We need a more efficient and predictable, multilateral trading system that can withstand future economic shocks.
Financing will be crucial.
On the revenue side, we have to explore how middle-income countries can mobilize domestic resources and reduce inefficiency and waste.
But official development assistance and external financing must play a complementary role in minimizing the financial constraints in many middle-income countries.
We also need better mechanisms and greater international cooperation to deal with the mounting and unsustainable levels of debt in many middle-income countries.
While many nations were dealing with mounting debt before COVID-19, the pandemic has further aggravated these difficulties.
In small island states, for example, the collapse of tourism has greatly hindered their capacity to repay debts.
And while the global response to the debt crisis is rightly attempting to support low-income countries, middle-income countries must not be left behind.
We are facing an increasingly severe situation in terms of fiscal space, and a world that is increasingly divided between countries that can react and recover in fiscal and financial terms and those that are on the verge of a debt crisis.
Even if these countries manage to avoid default, they will see long-lasting limitations on critical government spending on a variety of development and climate objectives in the years to come.
A new debt mechanism must provide a menu of options, including debt swaps, buy-backs and cancellations.
This is the moment to tackle long-standing weaknesses in the international debt architecture, from lack of agreed principles, to restructurings that provide too little relief, too late.
Innovative instruments to allow debt restructuring and meaningful debt reduction can help middle-income countries expand their fiscal space to boost investment and steer a resilient and sustainable recovery from the crisis.
In March, I convened another Meeting of Heads of State and Government on the international debt architecture, to join forces to prevent sovereign debt from derailing middle-income countries’ – and the world’s – aspirations to a better future.
I am encouraged to see growing recognition of the necessity for a new allocation of Special Drawing Rights by the International Monetary Fund, but they must be re-allocated the unused SDRs to support vulnerable countries, including middle-income countries.
I also believe that the Debt Service Suspension Initiative must be extended into 2022 but must be made available to highly indebted, vulnerable middle-income Countries that request it.
I hope that your deliberations will help us in designing effective policies to support middle-income countries in building back better after the pandemic.