The newly elected Director General of the World Trade Organization(WTO), Ngozi Okonjo-Iweala advocated for debt distress relief for developing countries through proposal of certain measures.
She made such advocacy through a speech delivered during a recently held High-Level Meeting with Heads of State and Government on the International Debt Architecture and Liquidity.
According to DG Ngozi, economies of developing countries have been dealt a huge blow by the pandemic, minimizing their financial strength to offset their debts.She stated that, “by closing off export opportunities and lowering commodity prices, COVID-19 has worsened debt dynamics for many developing countries. Additionally, “the collapse of export receipts from tourism has prompted balance of payments difficulties for many developing countries.”
DG Ngozi who is the first African and first female to head the WTO said that, action on trade can help alleviate debt pressures. She argued that, “lowering trade barriers gives countries more opportunities to push down their debt-to-exports ratios. Addressing supply-side constraints and improving access to trade finance would help them take better advantage of market opportunities.”
She cited the 2004 to 2005 Nigerian experience to further argue that, action on debt and financing can help rekindle investment, growth and trade. With this point, DG Ngozi proposed to the gathering, the relevance of the G20 Debt Service Suspension Initiative (DSSI) in this particular situation.
“Fiscal sustainability for debt-distressed developing countries demands an enhanced DSSI: A debt service standstill till end 2022 and even mid-2023 by all bilateral official creditors.” She said, adding that “for countries with unsustainable debt burdens, this should be supplemented by haircuts to private creditors in the context of an IMF program. For countries with sustainable debt, the IMF and World Bank should provide financing even before official restructurings have finalized.”
She equally recognized the impact of new SDR allocation and accelerated IDA20 as a measure with potentials to make enough resources available for fiscally constrained countries to prevent imports from contracting.
DG Ngozi assured that, by delivering results at the WTO this year, governments can reinforce the predictable framework of rules that underpin global trade, and enhance the ability of countries to earn the foreign exchange they need.