KARACHI: The COVID-19 pandemic has exacerbated debt risk and exposed fragilities in the global financial architecture. The pandemic and its particularly adverse effects on the developing economies dependent on commodities, remittances and tourism could significantly increase the number of those countries in or at the risk of debt distress.
Debt distress has hampered developing countries’ capacity to address health issues, food security, growing unemployment and poverty rates. Ensuring debt sustainability and liquidity can play an essential role in achieving a sustainable, inclusive and resilient recovery.
Virtually addressing the UN Economic and Social Council (ECOSOC) in New York this week, Prime Minister Imran Khan underscored the “massive socio-economic fallout.”
Prime Minister was persuasive in asking creditors to provide debt suspension to cope with the negative economic impact of the Covid-19 pandemic. He welcomed the G20’s Debt Service Suspension Initiative (DSSI) as a short-term initiative in alleviating liquidity pressures. However, further action is needed to provide developing countries with the capacity and necessary time to tackle the crisis.
Other speakers, including UN Secretary-General Antonio Guterres, called for the expansion of the DSSI to include all developing countries facing fiscal and liquidity challenges and request. And an extension of the DSSI beyond 2021, particularly for SIDS, which are among the countries experiencing the highest indebtedness and multidimensional vulnerability levels.