Source: UN News: Thursday, 02 April 2026 00:01 AM
Availability of adequate and timely financial resources is essential to promote sustainable development, but developing countries are lagging behind in this race and are able to get loans only at high interest rates. The United Nations has warned that the current ‘rating’ system for loans often exaggerates the risks while ignoring the economic potential. Because of this, developing countries are short of funds and development efforts are being affected. ‘Credit rating’ refers to the assessment of the ability of a country’s government to repay its debt in full on time. This ‘rating’ or assessment decides what price a sovereign country will have to pay to borrow money in the international market. If the ‘credit rating’ is low, the risk is considered higher and hence the interest rate also increases. Tweet URL
UN Council for Economic and Social Affairs (UNCOC)ECOSOC) held a special meeting on credit ratings on Monday, which was addressed by Deputy Secretary-General Amina Mohammed on behalf of the UN Chief. She cautioned that the current system relies on outdated and incomplete information, which is not fair to many countries in global capital markets and they have to suffer the consequences. She said that “sufficient and timely access to financial resources drives sustainable development,” but this fuel The UN Deputy Secretary-General pointed out that developing countries have to pay 1,400 billion dollars every year to service their debts. 3.4 billion people are living in countries that spend more on repaying their debt than on health or education. Effects of global turmoilAccording to Aamina Mohammed, this crisis is being deepened by global instability. Violent conflict and economic turmoil have led to rising prices of fuel and raw materials, increased fiscal pressures and slowing progress. At the same time, countries vulnerable to climate change are suffering loss of life and property due to extreme weather events and disasters, while resources to recover from them are not available at affordable rates. Deputy Secretary General Amina Mohammed discussed ‘Credit Rating’, the existing debt at the global level He also called for reforms in the system and said that new reforms need to be implemented to strengthen the participation of developing countries. These include a platform for borrowing countries, a framework for developing principles for responsible borrowing and lending by country governments, and a UN-led process that brings together borrowing and lending countries, private lenders, international financial institutions, academia and civil society. As part of efforts to bring about improvement, the example of the plan of ‘African Credit Rating Agency’ was given. Envisioning a new rating system, Deputy Secretary General Amina Mohammed said that there is a need to make comprehensive changes in the way sovereign ratings of countries are decided. A new system in which opportunities as well as weaknesses are taken into account. He said that we also need to bring about a change in mindset, and move from long-term speculation to long-term investment. Such future-oriented and transparent methods will have to be adopted, in which the real possibilities of the countries can be reflected. According to the UN Deputy Chief, the provision of borrowing at affordable rates for development work will help countries, and encourage investment in health, education, infrastructure, climate resilience and renewable energy. Over time, this will boost the prosperity of countries, help in reducing risks and also improve economic stability.