Impact of high debt levels on least developed countries ‘cannot be overstated’, says UN 

13 April 2019

The impact of high levels of debt on development efforts “cannot be overstated”, the head of the United Nations Development Fund (UNDP) told a Ministerial Breakfast Meeting on least developed countries (LDCs) on Saturday.

“While debt financing remains an important source for achieving positive development outcomes in LDCs, the recent trends are a cause for concern” UNDP Administrator Achim Steiner said at the meeting on strengthening resilience to LDCs’ debt vulnerability.

He mentioned that some countries, such as Mozambique, Zimbabwe and Malawi where Cyclone Idai wreaked havoc last month, faced intersecting development threats.

“Cyclone Idai not only demonstrates the devasting effects of a climactic shock, it also amplifies other vulnerabilities that we need to pay close attention to in order to build resilience within countries to maintain their sustainable development”, said Mr. Steiner.

He elaborated on how global stock debts have risen to levels not seen since the 1980s debt crisis and called even “more concerning” the LDCs debt build-up after being written off in the 1990s and early 2000s.

Attributing this to “increased public investments” and “a shift from traditional sources to commercial sources of financing”, Mr. Stiner said: “This has presented new and significant challenges in debt management at the country-level”.

According to the most recent International Monetary Fund (IMF)-World Bank debt sustainability analyses, 40 per cent of LDCs and low-income countries are either in or at high risk of debt distress, while 164 others are at extreme risk. 

“The trends are particularly unsettling for Sub-Saharan Africa”, he asserted.

On a positive note, most LDCs have used government borrowing to finance public investments – significantly improving human development outcomes. 

As an example, the UNDP chief said that between 1990 and 2017, the human development index of LDCs as a group increased more than twice the global annual average of 0.7 per cent.

Collective efforts needed

“Our collective efforts and continued support” remain “of critical importance” stressed Mr. Stiner, pointing out that not only do debt obligations compete with other public expenditure for resources, but that many economies also lack resilience to economic or environmental shocks.

He highlighted that LDCs need “comprehensive policy and programmatic support” to ensure enhanced debt management, sound macroeconomic policies and development financing to scale.

“UNDP is supporting countries to expand their fiscal space through domestic resource mobilization efforts, amongst other instruments” he said.

“I would like to reaffirm UNDP’s continued strong commitment to work with Governments, international financial institutions, other UN agencies, the private sector and other stakeholders in order to bring development financing to scale in order to ease the debt burden in LDCs”, concluded the UNDP Administrator. 

 

♦ Receive daily updates directly in your inbox - Subscribe here to a topic.
♦ Download the UN News app for your iOS or Android devices.

News Tracker: Past Stories on This Issue

IMF cuts global growth outlook, but predicts pick up later in 2019

The outlook for global growth is at its lowest since the financial crisis, but expected to pick up in the second half of 2019, the International Monetary Fund reported on Tuesday, so long as “policy missteps that could harm economic activity” are avoided.

Lack of basic water facilities risks millions of lives globally: UN health agency

More than two billion people face grave health risks because basic water facilities are not available in one in four medical centres globally, the UN has said, in an appeal to countries to do more to prevent the transmission of treatable infections that can turn deadly if not washed or flushed, away.