The world's poorest countries are having to prioritize debt service over investments, United Nations Development Program administrator Achim Steiner said on Monday, scuppering progress towards their sustainable development goals.
Speaking at an event in Hamburg, Steiner said the financial crunch meant countries worldwide were struggling to meet the goals — a set of 17 wide-ranging targets such as tackling poverty and hunger, improving access to education and health care, providing clean energy and protecting biodiversity.
"For many, least developed countries, they have literally been priced out of the financial markets. They cannot borrow any more money," Steiner told the Hamburg Sustainability Conference, adding that they must draw down other spending to avoid debt default. "It's a very extreme situation."
Countries like Ghana, Sri Lanka and Zambia have defaulted on their debt in recent years, while others are struggling to make payments after the global interest rate hiking cycle sent borrowing costs higher.
At the same time, the world needs trillions of dollars more per year to meet climate spending goals. Steiner said boosting financing was "absolutely central" to meeting sustainable development goals – something his organization is monitoring closely.
"We have to tackle this issue of our international financial architecture and our international financial system," Steiner said. "If not, we are going to fall apart in our endeavor to find answers that our citizens are expecting us to find."
World Bank President Ajay Banga, speaking at the same event, said official and multilateral lenders would not be able to provide the $4 trillion needed to reach the goals without help.
"That gap is going to need the private sector," Banga said during a panel discussion.
Using public money to de-risk private investment was one way of leveraging multilateral balance sheets, he added, saying the Washington-based lenders had boosted the insurance for investors looking to get involved in renewables in developing world.
"We've already doubled where we were a year ago. There is more to come."
The World Bank announced in July it had started operating a one-stop-shop loan and investment guarantee platform with the aim of tripling the provision of guarantees and risk insurance provided around the world to $20 billion a year.
Reaching the sustainable development goals would require standardizing financing vehicles and making it easier for public private partnerships to get off the ground, German Chancellor Olaf Scholz said.
"Without the expertise and investment of the private sector, the sustainable development goals cannot be reached,” Scholz said during a keynote speech.