Great finance divide poses a major setback for sustainable development, warns UN

Great finance divide poses a major setback for sustainable development, warns UN

A man distributes free bread to poor women during the holy fasting month of Ramadan in front of a bakery in Kabul on April 10, 2022. WAKIL KOHSAR AFP UNITED NATIONS - A great finance divide between rich and poor countries amid the COVID 19 Pandemic poses a major setback for sustainable development, warns a UN report.

The 2022 Financing for Sustainable Development Report: Bridging the Finance Divide, released Tuesday, finds that while rich countries were able to support their pandemic recovery with record sums borrowed at ultra-low interest rates, the poorest countries spent billions servicing debt, preventing them from investing in sustainable development.

ALSO READ: UN agencies warn of the famine in Somalia.

The poorest developing countries pay 14 percent of their revenue for interest on debt, almost four times higher than developed countries, at 3.5 percent. Many developing countries were forced to cut budgets for education, infrastructure and other capital spending because of the pandemic, according to the report.

UN agency: Global economic growth is projected to be down to 2.6% by the year 2.6%.

While many developed countries saw a rapid economic recovery from the Pandemic shock in 2021, developing countries did not regain lost ground. In one in five developing countries, GDP per capita was projected to be below 2019 levels by the end of 2023. The report says this is even before accounting for the fallout from the war in Ukraine.

In the year 2021, the pandemic shock plunged 77 million more people into extreme poverty.

Unless the international community reverses course, this divergence will persist and may increase over the coming months and years, the report warns.

The conflict in Ukraine has resulted in rising commodity prices, further supply bottlenecks, increased financial market volatility and downside economic risks, raising the specter of stagflation. The tightening of global financing conditions in the face of rising inflation will put more countries at risk of debt distress, limiting fiscal space and hampering economic growth, it says.

ALSO READ: UN chief warns against'sleepwalking' to climate disasters.

Today, 60 percent of the least developed and low-income countries are already at high risk of debt distress. The vaccine inequity remains high. It says climate change will exacerbate financing challenges, particularly in vulnerable countries.

The report recommends actions in three areas. There must be urgent action to address financing gaps and rising debt risks. All financing flows must be aligned with sustainable development. Transparency and the information ecosystem must be improved to enable countries to manage risks and use resources.

The UN Secretary-General Amina Mohammed, who launched the report at the UN HeadquartersUN Headquarters in New York, called for action to address the great finance divide. The international community has taken important steps to mitigate the social and economic fallout of the pandemic, including through large-scale provision of emergency financing and the creation of debt relief instruments. She said that more needed to be done to close the recovery gap, address debt distress and secure a better future for our children and for ourselves.