Global financial systems must evolve to serve development, not constrain it. At UNCTAD’s quadrennial conference, world leaders outline how to change course.
A hospital in Zambia postponed equipment purchases to make debt payments. Schools in Bangladesh closed early because of budget constraints.
Speaking at a high-level roundtable during the 16th United Nations Conference on Trade and Development (UNCTAD16), Secretary-General Rebeca Grynspan shone a light on the hard choice facing some of the world’s poorest countries: To default on their debt or on their development.
Currently, more than 3.4 billion people live in countries spending more on debt servicing than on health or education.
Meanwhile, in a world of low growth, shrinking aid and mounting fiscal strain, developing nations continue to face a $4 trillion annual financing gap for sustainable development.
The international financial system is failing to meet the needs of developing countries, leaving billions trapped in a cycle of debt and underinvestment that threatens global progress towards the Sustainable Development Goals.
Turning commitments into action
The call for urgent reform builds on the Sevilla Commitment, adopted in July at the 4th International Conference on Financing for Development. This agreement sets out a roadmap to modernize global finance, strengthen the voice of borrower nations, as well as promote responsible lending and borrowing.
“The Sevilla Commitment provides the roadmap – now we need to walk it,” Ms Grynspan said.
The UNCTAD chief outlined two priorities: Reforming the international financial architecture to deliver timely and equitable liquidity and creating new platforms for debt cooperation that give borrowers greater collective voice.
From crisis to cooperation: UNCTAD's vital role
Speakers at the ministerial roundtable agreed that reforming the global financial architecture is no longer optional.
Ahmed Kouchouk, Egypt’s Minister of Finance, warned that many developing countries have been “forced to default on their development goals and objectives” because of limited fiscal space.
“We are not defaulting on our debt,” he said. “We are defaulting on our development.”
Inés Carpio San Román, Director-General for International Finance of Spain, underscored UNCTAD’s role in advancing the implementation of the Sevilla reforms.
“UNCTAD has a key role to play because of its expertise on debt and systemic risk analysis – and because of its credibility as a convener with all UN Member States,” she said.
Other participants included Elmer José Germán Gonzalo Schialer Salcedo, Peru’s Minister of Foreign Affairs; Daniel Pacho, Under Secretary for the Multilateral Sector of the Holy See; Paolo Gentiloni, Co-Chair of the UN Expert Group on Debt; and Carlos Correa, Executive Director of the South Centre.