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Impact of high debt levels on least developed countries (UN)

“While debt financing remains an important source of positive development results in LDCs, Achim Steiner, UNDP Administrator, said at the LDCs’ Debt Vulnerability Resilience Meeting.

He mentioned that some countries, such as Mozambique, Zimbabwe, and Malawi, where Hurricane Ida had wreaked havoc last month, were facing growing threats to development.

“Hurricane Idai not only demonstrates the devastating effects of a climate shock, it also reinforces other vulnerabilities that we need to pay attention to as part of their sustainable development,” said Steiner.

He explained how the global debt had reached the level of the debt crisis in the 1980s and called even more “the problem” of the accumulation of debt of the LDCs after its amortization in the early 1990s.

Mr Stiner said: “This has presented significant new challenges for debt management at the national level”.

According to the latest analyses of the International Monetary Fund (IMF) and the World Bank on debt sustainability, 40% of LDCs and low-income countries are at high risk of debt distress and 164 others are extremely risky.

“The trends are particularly troubling for sub-Saharan Africa,” he said.

We have a positive note: most LDCs have used government borrowing to finance their public finances, which has significantly improved human development outcomes.

For example, the UNDP chief said that between 1990 and 2017, the LDCs’ human development index was 0.7% higher than the global average.

Mr. Stiner, pointing out that it’s not just about debt, it’s not necessary to do it either.

He stressed that LDCs should be “comprehensive policy and program support” to ensure improved debt management, sound macroeconomic policies and scaled-up development finance.

“UNDP is helping countries expand their fiscal space through domestic resource mobilization efforts, among other things,” he said.

“I would like to reaffirm UNDP’s strong commitment to continue working with governments, international financial institutions, other agencies, the private sector and other stakeholders in LDCs,” concluded the UNDP Administrator.

Source: SDG Knowledge Hub.