To date, the global financial system has failed to effectively address the effects of the current crises that are affecting the Southern Hemisphere most: COVID-19 pandemic, the war in Ukraine and the ongoing climate emergency.
“Today Many crises are creating complex shocks for developing countries – largely due to an unfair, short-term, crisis-prone global financial system that exacerbates inequality,” warned the UN. Secretary General António Guterrestick Launched Stimulus SDG.
Large scale expansion
“We need to massively scale up reasonable long-term financing by aligning all financial flows to the SDGs and improve the lending conditions of multilateral development banks,” emphasized the Secretary-General.
“The high cost of debt and the growing risk of debt distress call for decisive action to be taken at least $500 billion available annually to developing countries and convert short-term loans into long-term debt at lower interest rates.”
Level playing field
Half way to Agenda 2030 The United Nations argues that progress towards the Sustainable Development Goals (SDGs) – the world’s road out of the crisis – is not where it should be.
To reverse course and make steady progress toward the Goals, the SDG Stimulus highlights the need for the international community to come together to mobilize investments for the SDGs – but, in doing so, also create a new international financial structure that will ensure that finance is automatically invested to support a transition that is fair, inclusive and equitable for all countries.
The current global financial system born of two devastating World Wars – originally created to provide a global safety net in shocks – is the system in which most countries The world’s poorest have seen their debt payments soar 35% by 2022, the UN noted.
‘Great financial divide’
The “great financial divide” continues to grow, making the Southern Hemisphere more vulnerable to shocks.
Developed countries do not have the resources they urgently need to invest in recovery, climate action and the SDGsMake them ready to fall even lag behind when the next crisis hits – and even less likely to benefit from future transitions, including green transitions.
As of November last year, 37 of the world’s 69 poorest countries were at high risk or already deeply indebted, while a quarter of the middle-income countries, where the majority of the poor live, are at risk. extreme, high financial risk. fall.
Accordingly, the number of more people falling into extreme poverty in countries or at high risk of falling into poverty due to debt is estimated to be 175 million by 2030, including 89 million women and children. girls, according to United Nations data.
Even before the recent rise in interest rates, the least developed countries that borrowed from international capital markets typically paid interest rates between 5 and 8 percent, compared with just 1 percent in many developed countries.
Charlotte Fatuma, a refugee from the Democratic Republic of the Congo (DRC), runs a shop at the Coranne IDP site in Mozambique, powered by electricity connected by UNHCR in collaboration with the World Bank and the African Development Bank connect.
stimulus plan
The SDG stimulus aims to offset adverse market conditions facing developing countries through investments in renewable energy, global social protection, decent job creation, healthcare health, quality education, sustainable food systems, urban infrastructure and the transition to digital work.
The United Nations says it is possible to increase funding by $500 billion a year through a combination of concessional and non-concessional financing in a mutually reinforcing manner.
3 point action plan
1. Tackling high debt costs and increasing debt distress riskincluding converting short-term high-interest loans into long-term or 30-year debt plans with lower interest rates.
2. Large-scale increase of reasonable long-term financial resources for developmentespecially through strengthening the capital bases of multilateral development banks (MDBs), improving their loan terms and by aligning all financial flows with the SDGs.
3. Extend contingency funding to countries in need, including integrating disaster and pandemic provisions into all sovereign loans, and issuing SDRs more automatically in times of crisis.
As Mr. Guterres emphasized, the SDG Stimulus, although ambitious, is achievable.
“Investing in SDGs is both sensible and feasible: it’s a win-win for the worldbecause the social and economic return on sustainable development in developing countries is very high.”
But to make this happen, “urgent political will to take synchronized and coordinated steps to implement this interconnected package of proposals in a timely manner is crucial.”
