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LONDON: Half of humanity — about 3.3 billion people — live in countries that spend more on debt servicing than on health, education, or social protection, said Dennis Francis, president of the 78th UN General Assembly, on Wednesday.   

Francis emphasized that “the current financial architecture has fallen short in mobilizing the stable, long-term, and equitable financing required to achieve the Sustainable Development Goals.”   

This came during the UN High-level Dialogue on Financing for Development in New York, which discussed practical solutions to tackle the financing gap between developed and developing nations as some 40 percent of developing countries suffer from severe debt issues.  

Owing to this financing divide between the Global South and the Global North, developing nations have been victims of what UN Secretary-General Antonio Guterres described as a “debt trap” hindering development.   

“Developing countries face borrowing costs up to eight times higher than developed countries — a debt trap,” he said, adding that “over 40 percent of people living in extreme poverty are in countries with severe debt challenges.”  

Recognizing the need for urgent action, Guterres said that “a two-track world of haves and have-nots is already driving a crisis in global trust.”  

The UN chief called for “reforms to the global financial architecture” to address the problems of financing for sustainable development, a systemic solution welcomed by member states.  

“The algorithm of the past no longer works in today’s world,” said European Council President Charles Michel in agreement.   

He added: “Financial institutions were created 80 years ago, and 80 years ago many of today’s UN members were not yet independent. The world has changed and the challenges have changed, so our institutions must also change or be left behind in the dust of history.”  

Citing the avalanche of debt-related challenges developing countries have been facing, Mohammed Al-Jasser, head of the Islamic Development Bank, referred in his keynote speech to mounting fiscal space difficulties, with poverty, debt stress, environmental challenges, and the aftermath of the COVID-19 pandemic all requiring financing.   

Al-Jasser explained that “multilateral development institutions, including mine, have been struggling to provide financing,” which, despite being critical for alleviating the pressures member states have been facing, is not sufficient.   

“We need something a lot more sustainable by the world community,” he said. “I think (that) first multilateralism has to be really restored as the guiding principle of all of our operations because if we act singularly, we are not going to have the punching power necessary to make significant changes in the circumstances of these countries.”   

The chief of the Islamic Development Bank pointed out that debt servicing in some African countries is about 5.5 percent of their gross domestic product, while only 3.7 percent is spent on education.   

“After COVID, more than 1.5 million children had no education for two years because they had no connections,” he added.   

Al-Jasser called for the mobilization of more resources, “particularly more concessional because 29 of the 57 member states are least developed countries and cannot afford a lot of the financing available.”  

The UN High-level Dialogue on Financing for Development, held this year under the theme “Financing the SDGs for a world where no one is left behind,” brought together world leaders, heads of international financial institutions, and multilateral development banks to discuss action to achieve the SDGs.