Mounting debt levels, especially in the poorer countries, is a major global developmental challenge, a top UN official has said.
According to UNDP Administrator Achim Steiner, “increased public investments” and “a shift from traditional sources to commercial sources of financing” are the major reasons for the rise.
He cited examples of Mozambique, Zimbabwe and Malawi where Cyclone Idai wreaked havoc last month, adding on to the already existing debt problem.
“Cyclone Idai not only demonstrates the devasting effects of a climactic shock, but 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”, he said.
According to a recent joint analysis by International Monetary Fund (IMF) and World Bank, 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.
On the brighter side, most LDCs have used government borrowing to finance public investments – significantly improving human development outcomes.