WITH many countries continuing to struggle to overcome the human and economic devastation from COVID-19, United Nations Secretary-General Mr Antonio Guterres convened a meeting of world leaders on Mondayto urge the international community to take additional and urgent action to ensure a robust recovery

"We are on the verge of a debt crisis," the Secretary-General told the high-level virtual event aimed to underscore the urgency of the need for bolder and concrete action to provide liquidity and address debt vulnerability in developing countries.

The event followed up on a series of meetings and round tables held last year to mobilise action to assist the economic recovery from the pandemic that resulted in a series of measures by the international community, but still not sufficient to meet the continuing and deepening crisis that many countries face.

"Six countries have already defaulted. One third of emerging market economies are at high risk of fiscal crisis. And the situation is even worse for least developed and low-income countries," Mr Guterres added.

He advocated for allocating new Special Drawing Rights (SDRs) and encouraging countries with strong reserve positions to reallocate unused SDRs to countries that need it; extend the G20’s Debt Service Suspension Initiative into 2022; and expand it to include all highly indebted, vulnerable middle-income countries affected by the crisis.

The UN chief also called for the expansion of the Common Framework for Debt Treatment to other vulnerable countries and provision of additional, targeted debt relief and to tackle long-standing weaknesses in the international debt architecture.

"Otherwise, we risk spiralling deeper into the worst recession since the Great Depression," he warned.

The COVID-19-induced contraction in economic activity, is severely impacting debt sustainability, particularly in Low Income Countries (LICs) and Middle Income Countries (MICs). In addition to providing critical debt relief and liquidity support, world leaders asked to create a new international debt architecture that ensures sustainability and encourages the private sector to integrate sustainability into its investment decisions to ensure a faster, stronger and more resilient recovery.

World Trade Organisation (WTO) Director-General Ms Ngozi Okonjo-Iweala said that by closing off export opportunities and lowering commodity prices, COVID-19 has worsened debt dynamics for many developing countries.

She stressed that lowering trade barriers and improving access to trade finance could help alleviate debt pressures and give countries more opportunities to push down their debt-to-exports ratios.

"By delivering results at the WTO this year, governments can reinforce the predictable framework of rules that underpin global trade and enhance the ability of countries to earn the foreign exchange they need," she said.

She called for fiscal sustainability for debt-distressed developing countries, urging members to opt for a debt service standstill till end 2022 and even mid-2023 by all bilateral official creditors.

For countries with unsustainable debt burdens, Ms Okonjo-Iweala recommended this to be supplemented by haircuts to private creditors in the context of an International Monetary Fund (IMF) programme.

"Ample concessional financing is needed to get these LICs and MICs durably on to their feet," she said.

In return, the WTO chief said, the countries must be ready to undertake the necessary structural reforms to make economic growth and financing sustainable.