Dozens of countries need urgent help to ease their debt as interest rates rise and the global economy slows. According to the UN Development Programme, if 54 developing countries do not cancel part of their debts, global poverty will increase sharply.
In addition, these countries will not be able to invest in measures that mitigate the impact of climate change.
The United Nations is calling in response to a new report on international debt. According to the UN Development Programme, more than half of all people living in extreme poverty live in countries with worryingly high debt levels.
The problems are becoming acute as central banks in the United States, the eurozone, and other rich countries raise interest rates. This makes borrowing for developing countries or emerging economies much more expensive because their debt securities suddenly become less attractive. Government bonds from richer countries, considered safe, also yield many returns.
According to the UN Development Programme, 19 developing countries have to pay so much more interest to lenders than the US that they are practically barred from new credit. The organization calls on richer countries to come up with solutions. In addition to crossing out debts, special clauses on loans to poor countries could also help.
Private lenders are often willing to discuss debt restructuring in developing countries’ debt crises. But according to economist George Gray Molina of the UN Development Program, rich countries with outstanding loans often fail.
The climate crisis makes aid even more urgent. Of the developing countries at risk from their high debt burden, 28 are in the top 50 most vulnerable to climate change.