UN Secretary-General Antonio Guterres speaks during a press conference in Port-au-Prince on July 1, 2023. (PHOTO / AFP)

UNITED NATIONS - An unfolding debt crisis underscores the need for urgent action to reform the global financial system, UN Secretary-General Antonio Guterres said on Wednesday.

Guterres made the remarks at the launch of a new report by the UN Global Crisis Response Group, entitled "A World of Debt."

The system has not fulfilled its mandate as a safety net to help all countries manage today's cascade of unforeseen shocks including the COVID-19 pandemic, the impact of the climate crisis and the conflict in Ukraine

"Half our world is sinking into a development disaster, fuelled by a crushing debt crisis," he said, citing the main message of the report.

Some 3.3 billion people, almost half of humanity, live in countries that spend more on debt interest payments than on education or health, he added.

Calling it "a systemic failure," the UN chief noted that some of the poorest countries are being forced into a choice between servicing their debt or serving their people.

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They have virtually no fiscal space for essential investments in the Sustainable Development Goals or the transition to renewable energy, he said.

Guterres pointed out that in 2022, global public debt reached a record $92 trillion, of which developing countries shoulder a disproportionate amount.

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A growing share is held by private creditors who charge sky-high interest rates to many developing countries. On average, African countries pay four times more for borrowing than the United States and eight times more than the wealthiest European countries, he added.

"It is one result of the inequality built into our outdated global financial system, which reflects the colonial power dynamics of the era when it was created," said the UN chief.

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The system has not fulfilled its mandate as a safety net to help all countries manage today's cascade of unforeseen shocks including the COVID-19 pandemic, the impact of the climate crisis and the conflict in Ukraine, he said.

Deep reforms to the global financial system will not happen overnight, but there are many steps that can be taken right now, he stressed.

"Action will not be easy. But it is essential, and urgent," Guterres said.