With spiking global food and fuel prices, the United Nations (UN) fears conflict in Ukraine dramatically worsens the economic outlook and the risk of widespread debt crises.
The crippling cost of debt financing for many developing countries has hamstrung their recovery from the COVID-19 pandemic, forced cutbacks in development spending, and constrained their ability to respond to further shocks, according to a new report launched by the UN.
The 2022 Financing for Sustainable Development Report: Bridging the Finance Divide, finds that while rich countries were able to support their pandemic recovery with record sums borrowed at ultra-low interest rates, the poorest countries spent billions servicing debt, preventing them from investing in sustainable development.
The pandemic shock plunged 77 million more people into extreme poverty in 2021, and by the end of the year many economies remained below pre-2019 levels.
The report estimates that one in five developing countries’ Gross Domestic Product per capita would not return to 2019 levels by the end of 2023, even before absorbing the impacts of the Ukraine war.
“As we are coming up to the halfway point of financing the world’s Sustainable Development Goals, the findings are alarming,” UN Deputy Secretary-General Amina Mohammed said.
“There is no excuse for inaction at this defining moment of collective responsibility, to ensure hundreds of millions of people are lifted out of hunger and poverty. We must invest in access for decent and green jobs, social protection, healthcare and education leaving no one behind”.
For many developing countries, the war will likely lead to further increases in debt distress and increased hunger.
Before the war, the pandemic recovery gaps had already widened, with developing countries on average having only enough COVID-19 vaccine doses for 24 per 100 people, versus almost 150 per 100 people for developed countries.
The report notes that there was some progress on poverty reduction, social protection, and investment in sustainable development in 2021, driven by actions in developed and some large developing countries, including $17 trillion in COVID-19 emergency spending.
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