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UN report finds improvements in external debt situation of poor countries

UN report finds improvements in external debt situation of poor countries

Developing countries have improved their external debt situation, but more must be done to help them meet payments, according to a report by Secretary-General Kofi Annan released today at United Nations Headquarters in New York.

"The year 2000 has seen some improvements in the external debt indicators of developing countries and transition economies," the report states. "With the total stock of debt virtually unchanged in nominal terms, and gross national product (GNP) growth rates exceeding 5 per cent in both developed and transition economies, debt to GNP ratios improved in all regions, and provisional figures for debt to exports ratios even show larger improvements."

At the same time, Mr. Annan cautions that "these improvements should be interpreted with care," pointing out that different countries experienced different levels of growth and export earnings. The cost of servicing debt "continues to represent a heavy burden for many developing countries," while last year, arrears on interest payments rose in Latin America and East Asia.

Drawing policy conclusions in response to these conditions, the Secretary-General calls for improving the initiative for Heavily Indebted Poor Countries (HIPC), which aims to facilitate relief for those States. "Evidence is increasingly suggesting that the debt sustainability exercises undertaken in the context of HIPC have been overly optimistic regarding the estimation of the level of indebtedness that countries would be able to sustain after receiving debt relief," the Secretary-General observes, stressing the importance of making an independent assessment of debt sustainability.

The report also calls for increased official development assistance (ODA) to help poor States. "This requires ODA to be raised in accordance with the needs of recipient countries," Mr. Annan writes, calling on donors to provide fresh funds to HIPC States without reducing overall levels of multilateral financing.