The Director-General of the World Trade Organisation, Dr Ngozi Okonjo-Iweala, has said that lowering trade barriers and improving access to trade finance could help alleviate debt pressures on many developing economies.
Okonjo-Iweala made the disclosure at a high-level meeting with Heads of State and Government on the I international debt architecture and liquidity.
The virtual meeting organised by the United Nations was themed ‘Financing for the development in the era of COVID-19 and beyond initiative.’
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Okonjo- Iweala said, “Lowering trade barriers gives countries more opportunities to push down their debt-to-exports ratios.
“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.”
She said COVID-19 has worsened debt dynamics for many developing countries.
The pandemic had cut the global Gross Domestic Product by 4.3 per cent in 2020 leading to the loss of 255 million jobs globally.
The DG noted that at the onset of the twin crisis, trade finance dried up for several low-income countries, while foreign banks cut existing credit lines or refused to endorse letters of credit unless guaranteed by others.
She said without trade finance, countries can import basic necessities only by paying cash in advance.
“As we saw with the example of Nigeria in 2004-2005, action on debt and financing can help rekindle investment, growth and trade,” said the WTO boss.
She explained that the G20 Debt Service Suspension Initiative and the Paris Club’s endorsement of the Common Framework was a breakthrough.
“Ample concessional financing is needed to get these Low Income Countries and Middle Income Countries durably on to their feet. In return, they must be ready to undertake the necessary structural reforms to make economic growth and financing sustainable,” She added.