UN Secretary-General Antonio Guterres has criticized the decades-old international financial system, including the World Bank and the International Monetary Fund (IMF). “Today’s system was created by a group of rich countries. And, of course, it is the rich countries that benefit the most,” Guterres said today on the sidelines of the UN conference in Geneva to support Pakistan after last year’s floods.
“Developing countries are being strangled by debt,” said Guterres. But they would not have access to funding to meet their dramatic challenges. While rich countries can borrow money in the markets today at interest rates of three or four percent, poor countries can only borrow funds at rates of 14 percent or more.
A new way of dealing with debt is also needed. Middle-income countries should also receive debt relief if threatened with insolvency. Multilateral development banks would have to change their business model. “They need to take on more risk and be able to use private finance more systematically.”