The 13th informal meeting of High-Level Political Forum 2021 explored policy recommendations to scale up public and private financing and unlock catalytic investments for the achievements of the SDGs.
The global debt sustainability challenges
The lack of fiscal space and the mounting risk of sovereign debt distress has become critical stumbling blocks for developing countries to achieve the 2030 Agenda. Under the brutal hit of the COVID-19 pandemic, countries experience unprecedented collapses of domestic revenue while weighing with urgent financial need to address the overlapping issues of health, climate, environment, recovery and inequalities. Unfortunately, while most developed countries have progressively moved on through advanced technological inputs and plentiful fiscal backups, the developing world continues its financial dilemma in balancing their mounting debt payments and addressing their severe developmental crisis, which not only upends their economic recovery, but could also generate new debt crisis. As of 2020, a significant record of sovereign credit rating downgrades and defaults was observed in many LDCs and MICs, causing large debt overhangs and chronically restrained economic recoveries for the subsequent years. Governments leave no choice but to continue borrowing and investing, thus lead to a vicious debt cycle with everlasting liquidity shortage and debt vulnerability, which also widens the global financial gap of recovery and SDG achievements. It is thereby essential for global actions to recognize the systematic issues of the current economic conjuncture and develop new financing instruments to pave an equal-paced COVID-19 recovery and SDG achievements for all.
Transformative measures to unlock public and private SDG investments
To foster innovative and transformative measures in strengthening global debt sustainability and creating fiscal space for SDGs investments, international debt architecture reform and sustainable debt management are imperative, which include supporting information, coordination, adaptation, and equity. Increasing debt information requires high transparency from governments, which could not only facilitate informed lending decisions from the creditors, but also increase governments’ accountability in financial transactions. Coordination-wise, effective partnerships between multilateral financial institutions, development partners, debtors and creditors are needed for more sustainable and effective reform. Moreover, when considering states’ eligibility for debt assistance, it is paramount to recognize countries’ vulnerabilities rather than solely their national income, which could lead to a more targeted and inclusive service for those who needed. As for equity, it is of utter urgency to ensure greater participation from LDCs and MICs in the international debt architecture to rebalance the global political decision-making dynamics. In addition, effective combinations of private-public investments are equally crucial for SDGs advancements. Innovative financial instruments including sustainability/green-linked bonds are excellent means to incentivize local and foreign private investments and help developing countries to close the SDG gaps. Other measures such as progressive taxation and digital market transformation can also effectively elicit domestic resources for further SDGs investments.
On the one hand, the effectiveness of SDGs investments heavily lies on governments’ willingness to undertake policy reforms and transform the economy in a sustainable direction. On the other hand, it is a global responsibility to ensure all emerging markets and developing countries can be adequately financed under a sustainable international debt architecture for an equal opportunity to recover and achieve the SDGs.
Meeting Title: High-level Political Forum on Sustainable Development (HLPF 2021), 13th Informal meeting
Date/Location: Monday, July 12, 2021; 09:00-11:30; The meeting was held virtually
Mr. Sergiy Kyslytsya (Ukraine), Vice President of ECOSOC;
Mr. Homi Kharas, Senior Fellow and Deputy Director for the Global Economy and Development program, Brookings Institution;
Ms. Alicia Bárcena, Executive Secretary of ECLAC;
Ms. Joyce Chang, Managing Director and Chair, Global Research, JP Morgan;
Ms. Anna Gelpern, Professor at Georgetown University and a non-resident senior fellow at the Peter G. Peterson Institute for International Economics; etc.
Written by: WIT-UN Representative Iris Sit