TRADE WARS, protectionism, and nationalist rhetoric are combining to weave the possibility of a night­mare debt crisis that could be worse than any previously experienced. Global borrowing is now at the high­est levels since the 1950s – and his­tory suggests we should take this as a warning that a debt crisis could be looming. Were one to materialise, it could inflict greater dislocation on international financial systems and national economic stability than ever previously witnessed, especial­ly in this highly uncertain environ­ment characterised by trade war and regional disintegration.

This would be particularly tragic in view of the extraordinary global commitment to delivering Sustain­able Development Goals, and as so many nations seem finally to be in earnest about tackling the causes and impact of the climate crisis. The impact of a parallel crisis in global debt would derail this, and could make much needed interna­tional cooperation on poverty and progress impossible. Governments would be diverted by the need to stabilise local economies devastated by unmanageable debt. Yet such a scenario can be averted.

Haunting memories of the eco­nomic chaos, poverty and suffering caused by previous debt crises are the reason that the finance minis­ters of Commonwealth are working together to prevent the needless re­currence of an avoidable crisis. The breadth and inclusiveness of the Commonwealth means that when our member countries meet, many perspectives are brought to the table. These can be shared to decisive ef­fect when Commonwealth countries work together to ensure the voices and views of all are taken into ac­count at forums such as the G20 and other international and regional gatherings.

It is no longer feasible for policies on debt, trade and other economic matters to be considered in isola­tion from the increasingly extensive impacts of climate change, which are becoming more frequent and more stark. Small island states tend to be the most vulnerable to extreme weather and natural disasters, and also to have the least resilience or re­sources with which to recover from the damage to their infrastructures and economies. 

With interest rates at historically low levels, borrowing becomes an attractive proposition yet heightens the concomitant risk of debt balloon­ing to levels which are unsustainable over the longer term. This raises the possibility that countries which have ‘borrowed their way out of trouble’ following a setback will eventually face very severe debt distress. Pre­venting such eventualities is a global challenge which requires collective and coordinated responses.

The Commonwealth is particularly and perhaps uniquely well-placed to ensure that perspectives and needs of developing nations are fully con­sidered in multilateral discussions on policy for tackling future debt cri­ses. This is the purpose of our Com­monwealth Finance Ministers Meet­ing taking place in Washington DC alongside the annual meetings of the World Bank and International Mon­etary Fund.

The ministers of our 53 diverse and widely distributed yet closely con­nected nations will this year examine proposals designed to improve debt transparency. They will consider ways in which debt contracts can be specially amended to provide relief during disasters. Such initiatives will be supported by collating the per­spectives of ministers from develop­ing countries so that their Common­wealth counterparts from countries with advanced economies can carry them forward for the attention of the G20.

The way to a stable and sustain­able economic future is for develop­ing and developed countries to work together inclusively on shaping the global debt rules which affect them all. So our Commonwealth approach is to focus on the roles of creditor and indebted countries.

There have been instances of hid­den national debt burdens, and this places responsibility on creditors as well as debtors. In countries where fiscal regulation is weak, debt may be acquired or accumulated in ways which are not transparent, and very seriously to the detriment of citizens. Those who provide credit in such circumstances are also culpable, and they too must be scrutinised and be made to bear responsibility – par­ticularly as those who suffer the most pain from unsustainable debt and carry the greatest burden at times of crisis tend to be the poor and margin­alised – those least able to cope.

Among topics and actions being considered at our 2019 Common­wealth Finance Ministers meeting are:

•Debt Relief – with agreement to be sought for debt contracts with vulnerable countries to include pro­vision for relief if severe natural di­saster strikes. 

•Transparency in debt through in­novation – encouragement to use the Commonwealth Meridian debt management system which helps to improve the accuracy with which government debt is recorded.

•Dialogue on debt – relaunch of the Commonwealth debt manage­ment forum to encourage interna­tional dialogue on the consequences of over-indebtedness so that sounder debt policies are adopted in order to prevent crises.

•Easier access to financing to re­duce debt burdens – through mecha­nisms and facilities such as the Com­monwealth Climate Finance Access Hub and Commonwealth Disaster Finance Portal which offer added capacity for developing countries to access to affordable debt financing.

By working together in such prac­tical ways, and on programmes that draw together a broad and inclusive array of nations, crisis can be avert­ed. It is essential for there to be hon­est and open collaboration between creditors and debtors in a spirit of trust and goodwill. This the Com­monwealth can offer, building on the depth of our connection and the ba­sis of equality on which our family of nations comes together.

Rather than sleep-walking towards yet another debt crisis, and the mis­ery such nightmare reality would bring, the Commonwealth can open up pathways toward horizons of hope, with rich and poor walking in harmony towards a fairer, more secure, more sustainable and more prosperous future in which all can share.

The writer is Commonwealth Sec­retary-General.

The views expressed in this ar­ticle are of the author.