The Economic Commission for Latin America and the Caribbean (ECLAC) considers that the increase in indebtedness levels in the Latin American region requires an urgent transformation of the international financial architecture of sovereign debt, with the objective of to offer countries different options and alternatives that allow countries an “inclusive and sustainable” development.

This is clear from the report ‘Public debt and restrictions on development in Latin America and the Caribbean’, prepared by ECLAC and which was presented this Tuesday by the organization’s executive secretary, José Manuel Salazar-Xirinachs, within the framework of the ‘ XXXV Regional Seminar on Fiscal Policy’.

This traditional meeting brings together authorities, specialists, civil society and academics every year to discuss the fiscal policy challenges faced by the countries of the region. On the second day of this Tuesday, the restrictions on growth and development that originate from public debt and their implications for fiscal space in the countries of Latin America and the Caribbean were analyzed.

In this way, according to the report, both the increase in debt levels in the region and the macroeconomic and financial conditions, which are currently “complex”, press the need to expand financing instruments for Latin America.

As Salazar explained, the increase in debt service, especially because of the higher interest paid, forces countries to allocate more and more public resources to guarantee debt sustainability.

This translates into reductions in public investment and social spending, which generates “a vicious circle” since they are necessary to promote inclusive, sustained and sustainable growth, which allows not only stabilizing the path of the debt, but also move towards the fulfillment of the Sustainable Development Goals (SDGs).

In this sense, the document calls for formulas to reduce borrowing costs, create a global financial safety net, and move towards a new institutional framework for sovereign debt restructuring.

Source: dpa

(Reference image source: ECLAC, Europa Press / dpa)

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