UN Chief calls for radical transformation of global financial system to tackle pressing global challenges, achieve sustainable development

As of November 2022, 37 out of 69 of the world’s poorest countries were either at high risk or already in debt distress, while one in four middle-income countries, which host the majority of the extreme poor, were at high risk of fiscal crisis. 

Accordingly, the number of additional people falling into extreme poverty in countries in or at high risk of entering debt distress is estimated to be 175 million by 2030, including 89 million women and girls.

Even prior to the recent rise in interest rates, least developed countries that borrowed from international capital markets often paid rates of 5 to 8 per cent, compared to 1 per cent for many developed countries. 

SDG Stimulus Offers

The SDG Stimulus aims to offset unfavorable market conditions faced by developing countries through investments in renewable energy, universal social protection, decent job creation, healthcare, quality education, sustainable food systems, urban infrastructure and the digital transformation. 

Increasing financing by $500 billion per year is possible through a combination of concessional and non-concessional finance in a mutually reinforcing way. 

Reforms to the international financial architecture are integral to the SDG Stimulus. As highlighted in the Addis Ababa Action Agenda, financing sustainable development is about more than the availability of financial resources. National and global policy frameworks influence risks, shape incentives, impact financing needs, and affect the cost of financing. 

The SDG Stimulus outlines three areas for immediate action: 

First, tackle the high cost of debt and rising risks of debt distress, including by converting short-term high interest borrowing into long-term (more than 30 year) debt at lower interest rates.

Second, massively scale up affordable long-term financing for development, especially through strengthening the multilateral development banks (MDB) capital base, improving the terms of their lending, and by aligning all financing flows with the SDGs.

Third, expand contingency financing to countries in need, including by integrating disaster and pandemic clauses into all sovereign lending, and more automatically issue SDRs in times of crisis.

Central role of International Financial Institutions

The international financial institutions remain at the heart of this agenda. Of immediate urgency, there are three important ways in which the Multilateral Development Banks can act.