The UN trade and development body on Thursday said that a substantive debt relief has to be provided to developing countries to reduce financial pressure on them amid coronavirus crisis. A global debt deal would help the developing nations to avoid looming debt disaster, United Nations Conference on Trade and Development (UNCTAD) said in a statement. "The international community should urgently take more steps to relieve the mounting financial pressure that debt payments are exerting on developing countries as they get to grips with the economic shock of COVID-19," said UNCTAD Secretary-General Mukhisa Kituyi.
The developing nations currently stare at substantive debt service repayments throughout the 2020s, according to the report. The repayments on their public external debt are expected to be about $3.4 trillion, between $2 trillion and $2.3 trillion in high-income developing countries and between $666 billion and $1.06 trillion in middle and low income countries, it added.
"Such standstills would provide macroeconomic "breathing space" for all crisis-stricken developing countries requesting forbearance to free up resources, normally dedicated to servicing external sovereign debt," the report said. UNCTAD proposes to create an International Developing Country Debt Authority (IDCDA) to guide sovereign debt restructurings in future.
Meanwhile, UNCTAD on March 30 had said that the developing and poorest countries would need $2.5 trillion from international financial organisations, particularly the International Monetary Fund (IMF), to fight coronavirus pandemic. "The Covid-19 Shock to Developing Countries," UNCTAD's updated Trade and Development report has revealed that "in the two months since the virus began spreading beyond China, developing countries have taken an enormous hit in terms of capital outflows, growing bond spreads, currency depreciations and lost export earnings, including from falling commodity prices and declining tourist revenues".