Project announced in effort to set sovereign lending guidelines
Geneva, 9 November 2009 - Debt service as a proportion of government revenue in developing countries will increase by more than 17% this year, UNCTAD´s Secretary-General said this morning in opening UNCTAD´s 7th Debt Management Conference.
Poor countries, hit hard by the financial and economic crisis, need to fund social and health programmes to protect their populations, Secretary-General Supachai Panitchpakdi said. But borrowing heavily to do this, as well as to build roads, railroads, ports and other infrastructure needed to allow long-term economic progress, saddles them with debt that leads to slow growth. Not making such investments also leads to slow growth, he said, and will keep many countries from meeting such Millennium Development Goals as the halving of extreme poverty by 2015.
The lately increased share of government revenues devoted to debt servicing -- which applies both to the Highly Indebted Poor Countries (HPIC) and other developing nations -- is therefore worrying, Mr. Supachai said. He noted that UNCTAD called for a temporary moratorium on official debt for low-income countries earlier this year, before this latest information on mounting debt-service payments was compiled.
UNCTAD has begun a major project called Promoting Sovereign Lending and Borrowing, he said, which aims among other things at helping creditor and debtor countries establish standards that might avoid periodic repayment difficulties and might more easily resolve disputes.
In its recent work, UNCTAD has continued to highlight the importance of official development assistance to poor countries, especially during periods of crisis. It has proposed a mechanism for "de-linking" donors´ aid budgets from the ups and downs of economic cycles so that aid doesn´t decline during crises, when it is needed most. In addition, UNCTAD´s Debt Management and Financial Analysis System Programme (DMFAS) is responding to the new challenges facing developing countries through improvements to the system and related services, Mr. Supachai said.
The Secretary-General reported that a recent study commissioned by UNCTAD has found that the financial crisis has weakened the banking sectors of a number of low-income countries. "If the global crisis were to extend beyond 2010, the risk of bank failures would increase in some developing countries, adding further pressure on their already strained budgetary positions," he said.
Also addressing the opening session of the 9-11 November conference was M. Musharraf Hossain Bhuiyan, Secretary of the Economic Relations Division of the Ministry of Finance of Bangladesh, who said the financial crisis is having "important repercussions, especially for least-developed countries."
He noted that such nations do not have domestic resources that enable them to carry out economic stimulus measures such as those employed in industrialized countries. And the need for greater "safety net measures" in poor nations presents their governments with a "Herculean task," he said. Meanwhile, the recession has in many cases cut demand for developing countries´ primary exports, and unemployment is climbing. The debt burdens of many nations are growing more onerous as a result, he told the meeting.
The conference went on to discuss the topic of "Burgeoning global debt: impact on developing countries." Panellists included Thomas Olofsson, Director & Head of the Debt Management Department of the Swedish National Debt Office; Yuefen Li, Head of the Debt and Development Finance Branch of UNCTAD´s Division on Globalization and Development Strategies; and Heiner Flassbeck, Director of the Division on Globalization and Development Strategies.
Among the subjects of panel discussions as the conference continues this week will be "Economic recession and risk of debt distress"; "Debt defaults and debt crises"; "Debt strategies"; "New developments and guidelines in debt reporting and statistics"; "Debt management and the auditor: the relevance and effectiveness of debt audit for debt management"; and "Capacity building needs: countries´ perspectives."
The United Nations General Assembly has requested UNCTAD to keep it informed on various issues related to debt and debt management. Recent UNCTAD research led to its proposal earlier this year for a temporary moratorium on official debt for low-income nations.
