UN Agencies Warn COVID-19 Pandemic Could Lead to New Debt Crisis
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The 2020 Financing for Sustainable Development Report notes that global financial markets have witnessed heavy losses and intense volatility due to the pandemic, and cautions that a new debt crisis could result.

To address this crisis, the report calls for a globally coordinated stimulus package, including reversing the decline in aid and increased concessional finance.

The report offers a number of suggestions for how to build back better for sustainable development, including the elimination of trade barriers and restrictions that affect supply chains.

The 2020 Financing for Sustainable Development Report highlights immediate and longer-term actions to respond to the COVID-19 crisis. The report, which is prepared each year by a team of over 60 UN agencies and international institutions, notes that global financial markets have witnessed heavy losses and intense volatility due to the pandemic, and cautions that a new debt crisis could result.

The Inter-agency Task Force on Financing for Development, which launched the FSDR on 9 April 2020, comprises over 60 agencies and international institutions and is led by the UN Department of Economic and Social Affairs (DESA). The Task Force includes the World Bank Group, the International Monetary Fund (IMF), the World Trade Organisation (WTO), the UN Conference on Trade and Development (UNCTAD) and the UN Development Programme (UNDP).

Investors have moved around USD 90 billion out of emerging markets – the largest outflow ever recorded.

As a result of the COVID-19 crisis, global financial markets have witnessed heavy losses and intense volatility, and investors have moved around USD 90 billion out of emerging markets — the largest outflow ever recorded.

To address this crisis, the 2020 FSDR calls for a globally coordinated stimulus package, including reversing the decline in aid and increased concessional finance. In order to prevent a debt crisis, the report suggests that debt payments from poor countries should be immediately suspended. After the crisis subsides, the FSDR suggests that debt sustainability and existing mechanisms should be reassessed and revisited. Additional recommendations include calls to stabilize financial markets by continuing to inject liquidity, and in the medium-term, exploring regulatory frameworks to limit over-borrowing for non-productive investments, such as repaying shareholders. 

In order to build back better for sustainable development, the report suggests that public and private investment in sustainable development should include resilient infrastructure. The report also calls for a focus on strengthened social protection systems, investment in crisis prevention, risk reduction and planning, and the elimination of trade barriers and restrictions that affect supply chains.

In addition, the report notes that while digital technologies present tremendous potential for the SDGs, COVID-19 has underlined challenges and risks related to exclusion and discrimination. As a result, public policies should be adjusted to exploit their potential and address risks.

UN Deputy Secretary-General Amina Mohammed points out that the world “was already falling behind in efforts to end poverty, take climate action and reduce inequalities.” With COVID-19 creating an additional, “first of its kind development emergency,” she called on all countries to both save lives and safeguard livelihoods in their response and recovery. 

The 2020 FSDR is the fifth report on implementing the Financing for Development outcomes and the means of implementation of the SDGs since the adoption of the 2030 Agenda and the Addis Ababa Action Agenda (AAAA) on FfD.

The report is prepared each year as an input to the UN Economic and Social Council’s (ECOSOC) Forum on Financing for Development Follow-up (FfD Forum), which reviews the AAAA and other financing for development outcomes, as well as the means of implementation for the SDGs.

The 2020 session of the FfD Forum was originally scheduled to take place from 20-23 April, in New York, US. Due to the COVID-19 situation, the Forum has been postponed until after April, on a date to be decided. [FSDR 2020 webpage] [Report overview] [DESA Financing for Sustainable Development Office (FSDO) press release] [Publication: 2020 Financing for Sustainable Development Report]


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