If we can rescue banks, we can rescue the hopes of developing countries

By António Guterres, Secretary-General of the United Nations

The meltdown of several major banks in recent months made headlines around the world. More than $250 billion was mobilized during the course of just one weekend to protect banks in the United States and Switzerland.

But there has been no such rescue attempt for scores of developing countries struggling to deal with a cascade of crises, from climate-related shocks to the COVID-19 pandemic and the Russian war in Ukraine. They are treated as though failure is an acceptable option.

The pandemic and the unequal recovery hit developing countries hard. Developed countries adopted expansionary fiscal and monetary policies that enabled them to invest in recovery; they have now largely returned to pre-pandemic growth paths. But developing countries, faced with high borrowing costs and limited fiscal space, were unable to do so. Turning to the financial markets, they may be charged interest rates up to 8 times higher than developed countries – a debt trap.

The climate crisis continues unabated, with a disproportionate impact on least developed countries and small island developing States. While developed countries can afford to pay for adaptation and resilience, developing countries cannot. Meanwhile, Russia’s war in Ukraine has amplified and accelerated a global cost-of-living crisis, pushing tens of millions more people into extreme poverty and hunger.

Sixty per cent of low-income countries are currently at high risk of or in debt distress – double the number in 2015. Since 2020, African countries have spent more on debt service payments than on healthcare.

While each country has its own unique context, the challenges are systemic, perpetuated by a dysfunctional global financial system that focuses on short-term returns and delivers too little, too late.

The world is fast running out of time to rescue the 2030 Agenda and the Sustainable Development Goals (SDGs) – our universally agreed plan for peace and prosperity on a healthy planet. The prospect of a world in which everyone can benefit from healthcare, education, decent work, clean air and water and a healthy environment is slipping out of reach.

As inequalities between rich and poor, men and women, developing and developed countries widen, a two-track world of haves and have-nots holds clear and obvious dangers for everyone. Without urgent, ambitious action, this gap will translate into not only a catastrophic development deficit in many countries – but an explosive trust deficit around the world.

This is why I am calling on the G20 to approve an SDG Stimulus – to scale up affordable long-term financing for countries in need, by at least $500 billion a year.

The SDG Stimulus aims to boost long term investments in sustainable development, particularly where transformation is most urgent: renewable energy, sustainable food systems, and the digital revolution. Developing countries need financing and technology to go through these transitions with minimal social disruptions.

This requires action in three areas.

First, we must tackle the high cost of debt and the rising risks of debt distress.  We need a new initiative to address debt relief and restructuring for all countries at risk – from least developed countries to vulnerable middle-income countries.

Debt instruments should incorporate disaster and pandemic clauses that halt payments in times of crisis. The SDG Stimulus also calls for innovative tools to replace debt with SDG investments. We need a new debt architecture to deal effectively with the new debt landscape.

Second, we must scale up long-term concessional financing for all countries in need.

Long-term productive investments in sustainability can combat the climate crisis, create decent jobs, stimulate growth, and build resilience.

Multilateral development banks must play a constructive role in such investment. To boost their lending capacity, they should use existing capital more efficiently, building on the G20’s review of capital adequacy, along with new capital infusions. The SDGs should be incorporated into all stages of the lending process.

Multilateral Development Banks should transform their business models and accept a new approach to risk. This includes massively leveraging their funds to attract greater flows of private finance into developing countries.

Third, we must expand contingency and emergency financing to countries in need. Last year the International Monetary Fund allocated $650 billion in Special Drawing Rights – the main global mechanism to boost liquidity during crises. Based on current quotas, developed countries received 26 times more than Least Developed Countries, and 13 times more than all the countries of Africa combined.

Emergency financing should automatically go to the neediest countries. Instead, it is widening inequalities. The SDG Stimulus calls for a meaningful reallocation of unused SDRs to the countries that need them.  We should also rethink the role of SDRs, especially in facilitating sustainable investment.

All these proposals are being discussed by the G20, the governing bodies of international financial institutions, and in innovative processes including the Bridgetown Initiative led by Barbadian Prime Minister Mia Amor Mottley, as well as at the United Nations. The SDG Stimulus brings these separate discussions together – and calls for greater ambition and immediate action.

It is our shared responsibility to secure a prosperous, sustainable future for all.

The SDGs are the pathway to securing that future – and the SDG Stimulus is the vehicle to get us there.

The world must get on board now. The Sustainable Development Goals are simply too big to fail.