Many developing countries are facing major debt crises due to inflationary pressures and rising interest rates, said Achim Steiner, administrator of the United Nations Development Program (UNDP).
“If we gave up on a vision for a better world, then truly I think we are facing a very dark time,” Steiner told Anadolu at the World Economic Forum in Davos, Switzerland.
Noting that there have been more wars around the world last year than at any time since 1945, Steiner emphasized that the conflicts displaced more people and created more refugees, resulting in economic and financial crises.
“So, we perhaps should not be surprised that progress has not happened as planned, (since) there have been major setbacks,” he said.
‘Sustainable Development Goals show the way forward’
Steiner pointed to the progress many countries made in terms of Sustainable Development Goals.
“For instance, in the area of digitalisation and connectivity and extraordinary advancement from 10 years ago, we were with 30% of the world population having access to internet and broadband. Today, we are talking about 80 to 90% in the next couple of years,” he said.
He also noted that there have been setbacks. “Where we are at the beginning of 2024, is a world that is disrupted, that is distressed, and that is lacking in confidence in one another to get out of this crisis,” he said.
“So, let’s not abandon the Sustainable Development Goals, because they, in fact, show us the way forward,” he added.
UNDP estimates 52 developing countries to potentially default
Steiner underlined that many developing countries are faced with financial problems due to debt crises.
He pointed out that inflationary pressures and rising interest rates have led to a significant increase in the amount that developing countries, especially the least developed countries, have to pay to service their debt.
“In fact, there is well over two dozen countries now who pay more in interest payments on their debt than they are able to invest in their education or health sectors. So, this is a development setback that is very significant,” said Steiner.
He underlined that the international community failed to find a proactive solution for the debt of developing countries.
“UNDP estimates 52 developing countries facing one form of debt distress and potentially also default, which would have very significant repercussions, not only for financial markets, but actually in those 52 countries live 40% of the world’s poorest people,” said Steiner.
“So, that alone gives you a sense of the magnitude that this current financial and debt crisis is causing,” he said.
Traditional development finances retreat at moment of crisis
Steiner noted that even institutions such as the UN have retreated their traditional development finances in times of crises, despite the need from developing countries.
As a result, countries are cutting back their development corporation budgets, which is, as Steiner said, “a major strategic error (that) creates new risks for the years that lie ahead.”
He said that speeches at the World Economic Forum signal “a light at the end of the tunnel,” as interest rates and inflation will go down. He added that “there is a sense (that) recovery will reemerge, maybe during this year.”
Steiner pointed out that many of the least developed countries are working to avoid default, which means they cannot make investments.
“There is an enormous amount of redirecting national resources from public budgets to service international debt. It’s an underinvestment in economic recovery. So, for the least developed countries, it is a much more serious situation and a much-prolonged crisis that they face,” he said.
‘Impact of climate change is enormously disruptive’
Steiner cited 2023 as a testament to the future once feared in terms of climate crisis, as he said it reminded people what climate change will bring in the distant future, such as natural disasters, extreme weather events, especially with the year seeing the hottest day ever recorded globally.
“This is the reality of today, and it is going to get significantly more challenging in the next few years. So, let me be very clear, I think the impact of climate change is enormously disruptive,” he said.
Steiner highlighted that the response to climate change is “too slow,” as it now significantly affects economies, businesses, and people in general.
He added that countries took major steps into advancing and accelerating climate actions in December at the UN Climate Change Conference (COP28) in Dubai, although those efforts were not sufficient.
‘Energy revolution underway’
Steiner underlined that there were investments in renewable energy infrastructure last year, which was much more than investments for gas, coal and nuclear energy combined.
“There is an energy revolution underway, and we just need to accelerate the pace (and) to also help particularly for developing countries to have access to finance and technology, so that they can also make this transition faster. We are running out of time; we are paying an even higher price,” said Steiner.
He emphasised that “the wealthier world needs to co-invest in helping the developing world emerge from the financial disruptions,” stemming from the coronavirus pandemic.
He also asserted the need to see a future of development that is full of possibilities.
Speaking of the digital revolution, Steiner said: “In Davos, we have seen a lot of discussion about digital and AI and how it will change our economies. There are risks, there are enormous opportunities, a world that drifts apart and sees in each other only the enemy or the competitor is not a world fit for the 21st century.” – Anadolu Agency
