"We are on the verge of a debt crisis. Today's meeting, convened with our partners, the prime ministers of Canada and Jamaica, is a call for urgent action," he told a high-level event on debt and liquidity.
Six countries have already defaulted. One-third of emerging market economies are at high risk of fiscal crisis. And the situation is even worse for least-developed and low-income countries. They face a painfully slow recovery that will put the 2030 Agenda for Sustainable Development and the Paris Agreement completely out of reach.
Developing countries need access to additional liquidity to respond to the pandemic and to invest in recovery. The international community must urgently provide the necessary support to all developing countries in need, said Guterres.
From the start of the pandemic, the United Nations has advocated for a three-phase approach to debt: a moratorium on debt payments, targeted debt relief, reforms to the international debt architecture, he noted.
Guterres welcomed the steps that have been taken, including fresh financing by international financial institutions, the Debt Service Suspension Initiative of the Group of 20, and the Common Framework for Debt Treatments, but said they are far from enough.
"Additional, targeted debt relief to vulnerable countries, including middle-income ones, will ultimately be needed. A new debt mechanism could provide a menu of options including debt swaps, buy-backs, and cancellations," he said.
This is also the moment to tackle long-standing weaknesses in the international debt architecture, from lack of agreed principles, to restructurings that provide too little relief, too late.
"Ultimately, we need a shift in mindsets towards responsible borrowing and lending, accepted by debtor and creditor countries, investors, market participants, credit rating agencies, and international organizations," said Guterres.