Ignoring nations' debt risks can trigger global recession, warns FM Nirmala Sitharaman

FM Nirmala Sitharaman

The rising debt vulnerabilities of various nations, if ignored, can trigger a global recession, said Finance Minister Nirmala Sitharaman.

Speaking at the virtual Voice of Global South Summit on January 12, the minister said global debt vulnerabilities are on the rise and posed threats of systemic global debt crisis.

"If left unaddressed, these mounting debt vulnerabilities can trigger a global recession and push millions under extreme poverty," she said.

Nirmala Sitharaman was speaking at the two-day summit after Prime Minister Narendra Modi, earlier today, called on the 'Global South' to band together and help shape the new world order.

In her remarks, the finance minister also said that strengthening multilateral development banks is key to addressing the global challenges of the 21st century. However, a major scale up of response mechanisms of international financial institutions and multilateral development banks is needed.

"We must explore mechanisms so that the support provided by these institutions is responsive to country-specific needs, sustainable, as well as scalable," she said on the first day of the two-day summit, adding that the pandemic had exposed vulnerabilities "at all levels" and that India's G-20 presidency is an opportunity as well as a responsibility to encourage collective solutions and rebuild trust in multilateralism.

The finance minister also warned of the continued risks the global economy faces from a growth slowdown, rising inflation, the possible resurgence of the pandemic, and geo-political conflicts. In such circumstances, she called on to the Global South to show "strong solidarity".