Governments in emerging economies have very limited – if any – fiscal space to support business and families in dealing with the worrying inflationary pressures prevailing in global food, agricultural and energy markets.
The wave of economic shocks caused by the war in Ukraine risks precipitating a widespread debt crisis in emerging markets which could result in further disruption to global trade and supply chains – thus placing a further drag on growth in advanced economies.
As a recent report from the United Nations’s Global Crisis Response Group makes clear, there is now an acute risk of severe hunger in many developing economies absent of action to ensure that governments have the fiscal space to provide appropriate social safety nets.
In this worrying context, ICC has issued an open letter on behalf of business urging finance ministers and Central Bank governors to use this week’s G20 Meeting to agree on three common-sense interventions to take the risk of a global debt crisis off the table – and, most fundamentally, ensure that all emerging markets have sufficient fiscal space to protect their citizens from the very real risks of hunger and hardship.
Governments must put political differences aside and take decisive action to ensure no government is left without the fiscal space to manage the unprecedented shocks to global energy and food systems. To this end, ICC urges finance ministers and Central Bank governors to:
- Reinstate the G20’s Debt Service Suspension Initiative for an initial one-year period through July 2023, ideally with broad eligibility criteria to offer debt service relief to all countries in need.
- Establish a time-bound roadmap to agree on enhancements to the Common Framework for Debt Treatment – no later than the G20 Leaders’ Summit in November 2022.
- Agree to a new issuance of IMF Special Drawing Rights – of no less than US$650 billion – coupled with further pledges.
ICC Secretary General John W.H. Denton AO stated: “While the clock is ticking, we believe there remains a narrow window of opportunity to mitigate the worst effects of the global cost-of-living crisis on emerging markets. Failure to rapidly address the debt and liquidity needs of developing countries in the coming months risks placing millions of lives and livelihoods in danger — as well as undermining the global economy’s nascent recovery from the COVID-19 pandemic.”