Poor states face 17 per cent debt servicing rise, threatening growth, UN warns

UNCTAD Secretary-General Supachai Panitchpakdi

9 November 2009 – Poor countries, already hit hard by the global financial and economic crisis in their efforts to fund social and health programmes, are facing a double blow this year with debt servicing increasing by over 17 per cent as a proportion of government revenue, a top United Nations trade official warned today.

Moreover, the crisis has weakened the banking sectors of several low-income countries, UN Conference on Trade and Development (UNCTAD) Secretary-General Supachai Panitchpakdi told a debt management conference in Geneva.

“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.

He stressed that developing countries faced a serious dilemma as they seek to emerge from poverty and achieve the Millennium Development Goals (MDGs) the world set itself in 2000 to slash a host of social ills, ranging from extreme poverty and hunger to maternal and infant mortality to lack of access to education and health care, all by 2015.

Borrowing heavily to achieve these targets, as well as to build roads, railways, ports and other infrastructure needed to allow long-term economic progress, saddles them with debt that leads to slow growth. But not making such investments also leads to slow growth and will lead to may countries not meeting the MDGs, he said.

UNCTAD has already begun a major project – called Promoting Sovereign Lending and Borrowing – which aims at helping creditor and debtor countries to establish standards that might avoid periodic repayment difficulties and more easily resolve disputes.

The three-day meeting, the seventh of UNCTAD’s debts management conferences, is being attended by over 300 participants from some 100 countries, including government finance, debt, and treasury officials, banking representatives and academics specializing in development finance, along with officials from multilateral organizations.


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