Commonwealth SG sees possibility of worse debt crisis

16 Oct '19

2 min read

Commonwealth secretary general Patricia Scotland. Pic: Commonwealth

Trade wars, protectionism and nationalist rhetoric are creating the possibility of a nightmarish debt crisis that could be worse than earlier ones, according to Commonwealth secretary general (SG) Patricia Scotland. Global borrowing is now at the highest levels since the 1950s and this should be taken as a warning that a debt crisis could be looming, she said.

In case a debt crisis occurs, it could inflict greater dislocation on international financial systems and national economic stability than ever previously witnessed, she said in an opinion piece released by the Commonwealth Secretariat recently.

This would be particularly tragic in view of the extraordinary global commitment to delivering the UN Sustainable Development Goals, she wrote.

The impact of a parallel crisis in global debt would derail this effort and could make much-needed international cooperation on poverty and progress impossible, she said.

With interest rates at historically low levels, borrowing becomes an attractive proposition yet heightens the concomitant risk of debt ballooning to levels which are unsustainable over the longer term. This situation raises the possibility that countries which have ‘borrowed their way out of trouble’ following a setback will eventually face very severe debt distress, she said.

Preventing such eventualities is a global challenge which requires collective and coordinated responses, she said.

The ministers of the 53 Commonwealth nations will this year examine proposals designed to improve debt transparency. Among topics and actions being considered at the 2019 Commonwealth Finance Ministers Meeting are debt relief, transparency in debt through innovation, dialogue on debt and easier access to financing to reduce debt burdens, she added.

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