Donor fatigue is a ‘political choice’ and ‘tragic error’, says UN development chief

Donor fatigue is a political choice and a “tragic error” by Western leaders, and it is making the Global South feel “disappointed, frustrated and even betrayed”, Achim Steiner, chief administrator of the UN development programme, told EURACTIV.
Earlier this week, an EU-hosted international donor conference raised $8 billion to help reconstruction In Turkey and Syria, though the UN Development Programme (UNDP) has estimated the cost of the damage at $104 billion.
The relatively low sums committed, combined with recent cuts to development aid by a handful of European countries, is the latest indication of ‘donor fatigue’ among wealthy countries – though Steiner pointed out that “donor fatigue is not a physical condition. It’s a political choice”.
“Let’s remind the wealthiest nations of the world that so far, collectively, they do not contribute more than 0.33% of the gross national income” for overseas aid, he added.
“I’m not judging Switzerland’s decision to jump in and rescue a bank, but $100 billion was committed in 48 hours,” the UNDP chief said, referring to the rapid state-backed takeover of troubled Credit Suisse last week amid fears about a new Western banking crisis.
“And yet, 11 years after a commitment to mobilise $100 billion a year to invest in energy transitions and climate change, they are still not fulfilling those commitments,” he noted, adding that “it’s very difficult for countries of the global south to take these commitments seriously right now.”
“This is not because countries of the global south are doubting climate change, in fact, they’re investing hundreds of billions of their own funding already in these energy transitions. But they feel to some extent disappointed, frustrated, some even say betrayed because the deals that they have committed to are simply not being honoured.”
“Yes, there is donor fatigue, but it’s a tragic error. It’s also a failure in political leadership,” he said.
Debt leadership needed
Last month the UN called for an urgent new debt relief programme worth $148 billion by 2029 to avoid a new global debt crisis based on a 30% haircut on sovereign debt for 52 countries at most risk of debt distress or default from 2021 to 2029.
Without such measures, more countries will slide towards default and it will be impossible for many states to invest in projects to mitigate climate change and poverty and transition to clean energy.
There is a recognition that something has to happen,” Steiner told EURACTIV, pointing to the blueprint to reform the international financial institutions by Barbadian Prime Minister Mia Mottley ahead of last year’s COP27 summit and the upcoming debt summit to be hosted by French President Emmanuel Macron in May.
“I think there is a growing realisation that finance is central to what happens next,” said Steiner, warning that many global financial pundits shrug off the debt dangers for the 52 countries “since they account for maybe 3 to 4% of sovereign debt”.
But he also said this view is changing and the cost of debt servicing “has created a lot of nervousness in the global financial system”.
Twenty-five developing economy governments currently have external debt service payments that amount to more than 20% of their total revenue – the highest number in more than 20 years.
The figures are comparable to the debt burdens seen before the Heavily Indebted Poor Countries (HIPC) initiative of the late 1990s and early 2000s, which wrote off over $100 billion of debt for many of the world’s poorest countries.
However, little progress was made at the G20 finance ministers meeting in India earlier this month, where divisions between the United States and China were particularly evident.
“We have seen at the last two or three G20 meetings the impact of the war on Ukraine also hampering the G20,” said Steiner. “The geopolitical tensions have prevented the G20 from playing the role it should do in such moments of crisis, which is to fast track a scalable and commensurate response.”
There are also tensions over who is responsible for the build-up of new debt. A new debt relief scheme would need the buy-in of China and there is concern that the accusations by EU and US officials of Beijing practising ‘debt trap’ diplomacy has angered their Chinese counterparts.
A report published last year by the NGO Debt Justice showed that 12% of the external debt of African countries is owed to Chinese lenders, compared to 35% to Western private lenders.
“There is the chicken and egg situation, really, that that is playing out right now,” Steiner said.
“On one side, there are those who argue that China must be part of a response to the global debt problem. And then there are those who argue that the majority of the debt being held in the world today is in terms of private creditors. It’s not sovereign debt, as it was in the 1970s or 1980s.”
“A third dimension is: Shouldn’t the World Bank and the international financial institutions also be part of a debt solution?”
“So I think it’s frustrating for many developing countries to watch this kind of dynamic play out in a very slow and seemingly not progressive way while countries are desperate to find a way to refinance themselves.”