3 CHAPTER

Addressing debt vulnerabilities of the least

developed countries
3
CHAPTER 3
Addressing debt vulnerabilities of the least
developed countries
A. Introduction 45

B. Debt vulnerabilities of the least developed countries 45

1. External debt and trends 46
2. Debt sustainability indicators for the least developed countries 49

C. Multilateral and bilateral debt relief initiatives 58

1. International cooperation on debt relief 59
2. Bilateral debt relief and South–South cooperation 60

D. Addressing the debt crisis 63

1. Multilateral and bilateral response to the debt crisis 64

E. Conclusions 67

Annex 68

References 75
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

A. Introduction
Debt crises in least developed countries (LDCs) were a The number of LDCs in or at high risk of
possibility long before the COVID-19 pandemic and the debt distress has increased since the
emergence of the polycrisis. External debt stocks have global financial crisis of 2008–2009
reverted to levels last seen in the 1990s prompting the
launch of the Heavily Indebted Poor Countries (HIPC)
initiative by the International Monetary Fund (IMF) and
Goal 17.4 (i.e. “assist developing countries in attaining
the World Bank in 1996. Debt service on public and
long-term debt sustainability through coordinated
publicly guaranteed debt (PPG) in LDCs in 2022 was
policies aimed at fostering debt financing, debt relief
three times higher than in 2011. Moreover the number
and debt restructuring, as appropriate, and address
of LDCs in debt distress or at high risk of distress has
the external debt of highly indebted poor countries
increased. In 2019, total external debt service in LDCs
to reduce debt distress”). The rest of the chapter
exceeded government expenditure on social sectors
is organized as follows. Section B analyses public
such as health and education (UNCTAD, 2022a), and
debt trends in the LDCs from 2000 to the present.
these same sectors also faced enormous challenges
The focus is on the composition of and structural
during the pandemic. In 2021, LDCs spent 4 or
changes in public debt, as well as the underlying
5 times more on PPG debt service and total debt
factors contributing to debt vulnerabilities of the
service, respectively, than in 2009, which points to their
LDCs. Section C discusses bilateral and multilateral
deteriorating and unsustainable debt situations.
debt relief initiatives, and international cooperation on
Most LDCs are facing structural current account deficits debt treatment. Section D highlights some initiatives
that are either widening or failing to improve. The risk that have the potential to unlock additional finance for
of debt crisis has increased due to the low capacity the LDCs. Section E summarizes the chapter.
of these countries to generate additional domestic
resources. Their lack of sufficient fiscal space to bolster
government expenditure during crises, and their
B. Debt vulnerabilities of the least
inability to mobilize private investment also hurt their developed countries
development prospects (UNCTAD, 2021 and 2022b,
The LDCs will need resilient growth in order to achieve
United Nations Global Crisis Response Group, 2023).
structural transformation and reduce their dependence
Disasters linked to climate change intensified in some
on official development assistance (ODA) for financing
LDCs during the period 2021–2023, further eroding
their development. In this regard, chapter 2 explored
their already constrained fiscal space. As highlighted
the extent to which LDCs are managing their fiscal
in chapter 1, a subdued global outlook did not
space in the context of multiple crises. The present
dissuade monetary authorities in both developing and
chapter views their debt build-up as a problem for
developed countries from aggressively hiking interest
fiscal policy in the face of multiple crises, and as a
rates (or delaying policy rate revisions) to tackle
consequence of long-standing structural problems.
inflation (UNCTAD, 2023a; United Nations, 2023a).
Debt financing is necessary for the LDCs to expand
Tighter monetary policy stances and a prolonged risk
fiscal spending during crises, and to meet their
of recession in developed economies may exacerbate
long-term development goals. However, this poses
the risk of sovereign debt crises, particularly for LDCs
two challenges, both of which risk increasing their
that were already at high risk of debt distress prior to
debt: (i) a temporary increase in public spending
the COVID-19 pandemic. In April 2023, 6 LDCs were
during crises is generally impossible without incurring
in debt distress (Malawi, Mozambique, Sao Tome
greater debt because tax revenues are inadequate,
and Principe, Somalia, the Sudan and Zambia), while
and (ii) their level of economic development suggests
17 others (Afghanistan, Burundi, the Central African
inadequate public investments, which must be ramped
Republic, Chad, the Comoros, Djibouti, Ethiopia,
up either through increased taxation or increased
the Gambia, Guinea-Bissau, Haiti, Kiribati, the Lao
borrowing (Battaglini and Coate, 2008; UNCTAD,
People’s Democratic Republic, Liberia, Sierra Leone,
2019, 2020a, 2021). Section B.1 highlights the trends
South Sudan, Togo and Tuvalu) were at high risk of
in LDC debt, and why it is important to address
debt distress (IMF, 2023a).
the structural nature of the problem. It presents
This chapter seeks to examine the extent of the the debt positions of the LDCs and how their debt
debt crisis among LDCs, understand its causes, vulnerabilities have evolved since 2009. In some of the
and propose policy recommendations that could analyses, the trend is extended to 2005–2006, which
contribute to achieving Sustainable Development coincides with the launch of the Multilateral Debt Relief

45
The Least Developed Countries Report 2023

Initiative (MDRI) by the International Monetary Fund increase their vulnerability to external shocks. Most
(IMF). The section also examines the impact of trade LDCs are dependent on primary commodities for the
shocks on public debts. Section B.2 presents debt bulk of their exports and fiscal revenues. However,
sustainability indicators, and highlights factors driving in order to accelerate diversification from primary
debt accumulation in LDCs. production they run the risk of rapidly accumulating
debt, especially if debt financing and fiscal outlays are
1. External debt and trends not synchronized with long-term policies to support
their structural transformation (UNCTAD, 2019
Structural imbalances fuelling least developed countries
and 2021). A rapid growth in exports is associated
debts
with the capacity, especially among the resource-rich
Rapid growth in national income boosts the ability of LDCs, to attract external financial resources, mainly
a country to absorb and utilize debt and withstand foreign direct investment (FDI) and loans (Ampofo et
economic shocks. Strong export performance, al., 2021); but there is also a positive and direct link
coupled with sustained long-term economic between public capital expenditure and public debt
growth, improves the capacity of the countries to (UNCTAD, 2019).
leverage debt financing when they are experiencing
According to the World Bank’s International Debt
balance-of-payments constraints (UNCTAD, 2014a).
Statistics, the total external debt stock of LDCs
During the period 2009–2021, the total gross
reached $569.5 billion in 2022 – a record, considering
domestic product (GDP) of LDCs grew at an average
that it grew very little during the period 1990–2005,
annual rate of 6.4 per cent, doubling from $599 billion
from $122.6 billion to $162.9 billion. In the aftermath
to $1.2 trillion, but the share of their exports in GDP
of the global financial crisis, LDCs rapidly accumulated
declined by an average annual rate of 1.7 per cent
external debts, as interest rates and bond yields
as the nominal value of their exports rose by a
tumbled in developed countries, while commodity
substantially lower margin than their GDP. In contrast,
the external debt stock of the LDCs grew at an exports strongly rallied between 2010–2014
average annual rate of 9.6 per cent, with the external and 2016–2018. The PPG component of external
public debt component growing at an average annual debt surged during the period 2006–2021, at an
rate of 8.1 per cent during the period. average annual growth rate of 8 per cent, but as a
share of total external debt stock, it declined from
The build-up of external debts in LDCs is a 82 per cent in 2005 to 62 per cent in 2021. However,
consequence of structural weaknesses that keep in nominal terms, the PPG debt stock more than
these countries trapped in a low growth pattern, and tripled, from $106 billion in 2006 to $353.4 billion
in 2022 (figure 3.1).
More than half of the total PPG debt stock owed by
LDCs’ dependence on commodities LDCs in 2021 was due to Bangladesh (18.6 per cent),
for exports and fiscal revenues Angola (13.9 per cent), Ethiopia (8.4 per cent), and the
United Republic of Tanzania (5.6 per cent) (figure 3.2).
leads to debt accumulation These countries, together with the Sudan, Senegal,
and jeopardizes structural Zambia, Uganda, Myanmar, Mozambique, the

transformation Figure 3.1

External debt stock of least developed countries, 1990–2022
EXPORTS 600 140
120
Billions of dollars

Billions of dollars

500
100
400
80
DEBTS 300
60
200
40
100 20
0 0
2000

2006

2009
2008
2005

2020
2007

2021
1990
1995

2010

2016

2019
2018
2014
2015
2013

2017
2012
2011

2022

External debt stock, private non-guaranteed (right axis) Total external debt stock
External debt stock, public and publicly guaranteed

Source: UNCTAD secretariat calculations based on World Bank, International

Debt Statistics (accessed March 2023).
Note: Data for 2022 are from UNCTAD, 2023b.

46
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

Figure 3.2
Public and publicly guaranteed debt stock and share of total least developed countries debt stock in 2021
70 20
18
60
16

Percentage of LDC total

50 14
Billions of dollars

40 12
10
30 8
20 6
4
10
2
0 0
Bangladesh
Angola
Ethiopia
United Republic of Tanzania
Sudan
Senegal
Zambia
Uganda
Myanmar
Mozambique
Lao People's Democratic Republic
Cambodia
Nepal
Democratic Republic of the Congo
Yemen
Benin
Rwanda
Mali
Burkina Faso
Niger
Mauritania
Madagascar
Guinea
Chad
Bhutan
Somalia
Djibouti
Malawi
Haiti
Afghanistan
Togo
Sierra Leone
Liberia
Lesotho
Guinea-Bissau
Gambia
Eritrea
Burundi
Central African Republic
Comoros
Sao Tome and Principe
Timor-Leste
Source: UNCTAD secretariat calculations based on World Bank, International Debt Statistics (accessed March 2023).

Lao People's Democratic Republic and Cambodia, in such as China, Kuwait and the Bolivarian Republic
that order, accounted for 75 per cent of the total PPG of Venezuela, and those of private creditors, have
debt stock of LDCs in 2021. all contributed to the increasing complexity of LDC
debt structures and debts issued at commercial
External debt complements domestic savings in
rates and with shorter maturities (UNCTAD, 2019;
fostering economic growth by plugging the external
Berensmann, 2019).
resource gap (defined as the difference between
domestic savings and gross fixed capital formation), A substantial share of private credit with shorter
and has a positive impact on economic growth maturities characterizes the debt structure of least
in capital constrained countries (UNCTAD, 2019). developed countries
Some countries experience debt distress or are
Debt owed by LDCs to private lenders and commercial
at high risk of distress for long periods, leading to
banks has been on the rise since 2012. PPG
assertions that the factors contributing to high debt
debt stock in bonds grew rapidly, from $0.5 billion
accumulation are long-standing and structural in
in 2011 to $22.6 billion in 2021. The amount owed to
nature, and that debt relief efforts have a marginal
commercial banks increased from $5 billion in 2000
effect unless they are complemented by reforms of
to $48 billion in 2021. The share of other private
domestic policies and institutions, and by economic
creditors increased during the period 2010–2015
structuring (UNCTAD, 2014b; Calcagno et al., 2015;
from $4 billion to $10 billion, though it fell slightly to
UNCTAD, 2021). Weak macroeconomic policies
$7 billion in 2021 from a previous high of $10 billion
and the political economy of the countries also
in 2015 (figure 3.3).
reduce the effectiveness of development finance on
economic growth, poverty reduction and structural Structurally, the largest component of PPG debt
change. Pervasive debt accumulation that follows stock was held by multilateral creditors, at 42 per
debt relief or debt restructuring is therefore a feature cent in 2021, down from 52 per cent in 2006, while
of an economy that is suffering systemic challenges the bilateral share in the PPG debt portfolio also
that affect debt sustainability. The fact that both declined slightly, from 39 per cent to 35 per cent.
official and multilateral flows are highly correlated During this period, the shares owed to commercial
with total debt service also points to an imperfect banks and private creditors through bonds
use of the international mechanisms for debt relief increased from 7 per cent and nil, respectively, to
(UNCTAD, 2000; Easterly, 2002; Mustapha and 14 per cent and 7 per cent, respectively. The debt
Prizzon, 2015; UNCTAD, 2019). Further, the shift in structure remains predominantly multilateral, but the
the financing landscape following the global financial decline in the multilateral component of PPG loans
crisis, a growing share of loans from official bilateral in 2021 was quite sharp for 23 LDCs compared
lenders that are not members of the Paris Club, to 2009 (figure 3.4). The International Development

47
 The Least Developed Countries Report 2023

Figure 3.3 the share of bonds declined from 4.2 per cent in 2014
Public and publicly guaranteed external debt stock of least to 2.7 per cent of PPG debt stock in 2021, despite
developed countries, 2000–2021 the country’s ability to borrow on blend credit terms.1
400 25
Export concentration adds to debt challenges
350
20
Billions of dollars

Billions of dollars
300
Primary commodities, which constitute the bulk of
250 15
200 LDC exports, face volatile prices and terms-of-trade
150 10 shocks, contributing to the weak capacity of the
100
5 LDCs to carry external debt sustainability (Coulibaly
50
0 0
et al., 2019; UNCTAD, 2020b, 2022b). Negative
price shocks tend to have devastating impacts on
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
incomes, as experienced by fuel-exporting LDCs
Other private creditors (right axis) Bonds (right axis)
Commercial banks Bilateral
during the global financial crisis and by many LDCs at
Multilateral Total PPG debt the peak of the COVID-19 pandemic in 2020. Since
Source: UNCTAD secretariat calculations, based on World Bank, International virtually all external debts of LDCs are denominated
Debt Statistics database (accessed March 2023). in foreign currencies, a slump in the price of their

Figure 3.4
Share of multilateral debt in least developed countries’ public and publicly guaranteed debt stock
100
Madagascar
Liberia Burkina Faso
90 Eritrea Solomon Nepal
Malawi Islands
80 Niger Lesotho

Sierra Leone Mali Rwanda

70 Burundi
Gambia Uganda
Ethiopia Mauritania United Rep.
60
Guinea-Bissau of Tanzania
Afghanistan Yemen Bangladesh
2021

50 Benin
Senegal Guinea
Central African Republic Democratic Republic
of the Congo
40 Togo
Comoros
Bhutan Djibouti Cambodia Mozambique Chad
30 Sao Tome
Myanmar and Principe Zambia
20
Sudan Somalia
Angola
10
Haiti Lao People's Democratic
Republic
0
0 10 20 30 40 50 60 70 80 90 100

2009
Source: UNCTAD secretariat calculations, based on World Bank, International Debt Statistics database (accessed March 2023).
Note: The 23 LDCs are those below the 45-degree line and to the right of the 50 per cent point on the horizontal axis.

Association’s (IDA) loan eligibility and creditworthiness exports delivers a direct shock to their economies,
criteria for loans extended by the International Bank which not only reduces their export earnings but also
for Reconstruction and Development (IBRD) also exposes these countries to foreign exchange risks
played a role, particularly for countries that were (UNCTAD, 2022c). Angola, Chad, the Democratic
ineligible for IDA loans. For instance, in Angola, the
share of bonds increased from 3 per cent of its PPG 1
Eligibility for IDA loans depend primary on an income
debt stock in 2014 to 17 per cent in 2021, and debt criterion, defined as GNI per capita below an established
owed to commercial banks accounted for an average threshold and updated annually ($1,315 in the fiscal
of 62 per cent of PPG debt stock in 2014–2021. year 2024). However, countries that are above the threshold
but assessed to lack creditworthiness to borrow from the
Since Angola is not an IDA-eligible country, the International Bank for Reconstruction and Development
multilateral component in its PPG debt stock only (IBRD) may also access IDA loans. Typically, there are
grew from 3 per cent in 2009 to 8 per cent in 2021. countries that are IDA-eligible based on per capita income
levels and also creditworthy for some IBRD loans, and
By contrast, an average of two thirds of Bangladesh’s these are countries that can blend, i.e., borrow from both
PPG debt stock was from multilateral sources, and IDA and IBRD (World Bank, 2023).

48
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

Republic of the Congo, Ethiopia, Guinea, the Lao

People's Democratic Republic, Mali, Mozambique,
Myanmar, Senegal, the Sudan, Uganda, the United
The debt vulnerability of LDCs
Republic of Tanzania and Zambia experienced the worsens due to the shrinking
greatest volatility in the value of their merchandise share of commodities in
exports during the period 2009–2021 (UNCTADStat world trade
database).
During the period 2000–2007, merchandise exports
were growing faster than debt in several LDCs, but the period 2006–2021 (figure A3.5). Togo’s exports
trade shocks experienced in 2012, 2016 and 2018 were higher than its debt stock in 2010–2015, while
reversed the gains made by some countries since Timor-Leste’s exports grew more quickly than its
the turn of the century (figure A3.1 to A3.6). The external PPG debt in 2019 in a turnaround despite
COVID-19 pandemic and its ramifications further COVID-19 (figure A3.6). Contrary to the common
deepened the crisis. For example, Angola’s debt trend, Solomon Islands marginally increased its debt
stock exceeded its exports for the first time in 2016, stock to $140 million in 2021 from $118 million in 2011,
although both were rising until 2018. Due to the while merchandise exports soared, from $215 million
unique importance of fuel exports to that country’s in 2010 to over $400 million per year in 2011–2019,
economy, the series of trade shocks were immediately and remained above $350 million in 2020–2021. The
transmitted throughout the economy, resulting in GDP of Solomon Islands in 2021 was $1.6 billion, with
a massive increase in its PPG debt-to-GDP ratio, merchandise exports at $413.7 million, exceeding its
from 39 per cent in 2015 to 84 per cent in 2016 as debt stock which amounted to $141 million.
output contracted (table A3.1). Thereafter, during the
period 2017–2021 the debt-to-GDP ratio remained 2. Debt sustainability indicators for the
above 60 per cent (88 per cent in 2020 and 69 per least developed countries
cent in 2021) after a further shock in 2018. On
the other hand, the debt-to-GDP ratios in 2021 Although debt levels increased across all country
remained below 50 per cent for several countries groups following the 2008–2009 global financial crisis,
including Bangladesh, Chad, Liberia, Madagascar the period after the crisis marked a critical phase for
and Sierra Leone (table A3.1). For these countries, the LDCs. As explained in chapter 2, changes to the
exports grew roughly at the same pace as debt international financial architecture have increased the
stocks in 2006–2021, but trade shocks in 2012, vulnerability of low-income countries to debt. A major
2016 and 2018 posed challenges for all LDCs concern for the LDCs is their shrinking capacity to repay
(figure A3.1). debt. In 2022, all indicators of external sustainability of
the LDCs deteriorated: the ratio of total debt service
The indicator that more closely reflects the capacity of to exports of goods and services rose to 18.9 per
a country to retire international debt is the growth rate cent from 18.3 per cent in 2021, and the share of
of its exports-to-debt ratio or more commonly, debt government revenue spent on servicing their debt rose
service-to-exports ratio. Some LDCs’ exports either to 17 per cent from 15.6 per cent in 2021. Meanwhile,
stagnated or declined after the global financial crisis the tightening of monetary policies in developed
(figure A3.2). For these countries, the rise in debt economies portends even higher borrowing costs for
service cost marks a significant shift in their exposure the LDCs in the short to medium term.
to debt-related risks, as their export structures
Most LDCs experienced a general trend of
compounded their weak external positions. Zambia’s
divergence between debt stocks and exports during
exports exceeded its debt stock in 2006–2014,
the period 2009–2021, signalling high debt risk
before sliding in 2015 as its debts soared (figure A3.3).
for countries with chronic current account deficits
In Mozambique, Nepal, the Niger, Rwanda and Sao
and high debt-to-GDP ratios. A sustained increase
Tome and Principe exports grew at a lower rate
in merchandise exports was needed to maintain
than their debt stocks after 2009. In the Comoros,
external sustainability, but they were adversely
Ethiopia, Haiti and Malawi, exports fell sharply or
affected by a series of trade shocks. As explained in
stagnated compared to the trend in their PPG debt
chapter 1, the COVID-19 pandemic and the multiple
stock in 2009–2021 (figure A3.2 to A3.4).
crises negatively affected their debt sustainability. This
Cambodia, the Democratic Republic of the section provides a snapshot of debt sustainability
Congo, the Gambia, Lesotho and Solomon Islands trends, and the factors that have contributed to the
consistently had more exports than debt during rapidly deteriorating situation.

49
 The Least Developed Countries Report 2023

a. Sustainability indicators show mounting debt burdens stock, but after 2018 debt service costs surged
as debts became more complex, with suboptimal
Rising debt-to-gross domestic product ratios
maturity schedules and a rising share of private
The pace of economic growth in LDCs was creditors, but also because LDCs generally pay a
significantly affected by trade shocks and weaker higher premium on bonds and other private loans.
global outlooks for the period 2009–2021. Lower
interest rates following the global financial crisis PPG debt service as a percentage of exports
created conducive conditions for LDCs to accumulate of goods and services increased in 25 LDCs
debts as borrowing costs tumbled. The soft terms in 2019–2021 compared to 2009–2011. In the
did not last, however, and as growth of commodity former period, 11 LDCs (Angola, Benin, Ethiopia, the
exports and gross national income (GNI) per capita Gambia, Lesotho, Mozambique, Nepal, the Niger,
income faltered, LDCs fell deeper into a low growth Rwanda, the Sudan and the United Republic of
pattern, weak investment and steadily rising costs Tanzania) incurred PPG debt service costs equivalent
of debt financing. As a result, PPG debt-to-GDP to at least 10 per cent of their exports of goods and
ratios in 2021 were up by more than 10 percentage services (figure 3.6). Since most LDCs face structural
points in 16 LDCs, and by more than 20 percentage balance-of-payments deficits, it may also be useful
points in 11 LDCs, compared to 2011 ratios. The to consider PPG debt service as a percentage
average PPG debt- to-GDP ratio for LDCs reached of exports of goods, services as well as primary
30 per cent in 2019 and 34 per cent in 2020, before income. This indicator shows that their debt service
contracting slightly to 32 per cent in 2021. Only Sao averaged 17 per cent of exports of goods, services
Tome and Principe, and Guinea achieved lower debt-
to-GDP ratios in 2021 (table A3.1). Figure 3.6
Increasing total debt and debt service ratios Public and publicly guaranteed debt service as a percentage
of exports of goods and services, 2009–2011 and 2019–2021
In nominal terms, the debt service on PPG debt 0 5 10 15 20 25 30
increased from $4.3 billion in 2000 to $27.3 billion Afghanistan
in 2021 (figure 3.5). This is consistent with the change Angola
Bangladesh
in the composition of LDCs’ external debt since the
Benin
global financial crisis. The increase in the share of Bhutan
private creditors in PPG debt has pushed up debt Burkina Faso
Cambodia
service to private creditors, which has surpassed Comoros
debt service to official creditors since 2014. The bond Democratic Republic of the Congo
component of debt service more than doubled during Djibouti
Ethiopia
the period 2019–2022 compared to 2016–2018. Gambia
Prior to the COVID-19 pandemic, debt service costs Guinea
Guinea-Bissau
increased idiosyncratically, driven by higher interest
Haiti
and amortization obligations on an expanding debt Lao People's Democratic Republic
Lesotho
Liberia
Figure 3.5 Madagascar
Debt service of the least developed countries, 2000–2021 Malawi
30 Mali
Mauritania
25 Mozambique
Billions of dollars

Myanmar
20 Nepal
Niger
15 Rwanda
Sao Tome and Principe
10
Sierra Leone
5 Solomon Islands
Sudan
0 United Republic of Tanzania
Timor-Leste
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

Togo
Uganda
Amortization – private creditors Amortization – official creditors Zambia
Interest – official creditors Interest – private creditors
Total debt service Debt service – private creditors 2009–2011 2019–2021
Debt service – official creditors Source: UNCTAD secretariat calculations, based on World Bank, International
Source: UNCTAD secretariat calculations, based on World Bank, International Debt Statistics database (accessed March 2023).
Debt Statistics database (accessed March 2023). Note: Only countries shown for which data were available.

50
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

and primary income in 2021, up from 11 per cent

in 2020 and 9.6 per cent in 2005. The LDCs incurring
high debt service costs as a percentage of exports
LDC debt has been shifting from
of goods, services and primary income in 2021 mostly public to private lenders,
were Guinea-Bissau (36 per cent), Rwanda (30 per
cent), the Sudan (27 per cent), Angola (26 per cent),
thus raising borrowing costs and
Senegal (23 per cent), the Gambia (22 per cent), endangering debt sustainability
Ethiopia (21 per cent), Lesotho (18 per cent), Benin
(18 per cent), Myanmar (17 per cent), the United
Republic of Tanzania (15 per cent), Bhutan
(15 per cent) and the Niger (13 per cent).
In 2019–2021, interest payments on external debt
as a percentage of exports of goods, service and
primary income exceeded 5 per cent: for Angola
(8 per cent), Ethiopia (7 per cent) and Lesotho
(9 per cent). In general, 18 of the 34 LDCs with
complete data paid more interest on PPG debt, on
average, as a percentage of exports of goods and
Malawi (19 per cent), Mozambique (14 per cent),
services in 2019–2021 than in 2009–2011, and the
Myanmar (14 per cent), Senegal (10 per cent), Togo
rise in debt service costs was quite significant for
(16 per cent), Uganda (16 per cent) and Zambia
Angola, Benin, Ethiopia, the Gambia, Lesotho, the
(34 per cent). Further, in Bangladesh and Malawi,
Niger, Rwanda, the Sudan, Togo, Uganda, the United
government expenditure on interest outstripped
Republic of Tanzania,and Zambia (figure 3.7). It is a
capital expenditure in 2017–2021; and in Angola,
matter of concern if the uptick in interest payments
Bangladesh, the Gambia, Madagascar and Zambia,
is not transitory, particularly for countries where
government expenditure on goods and services was
interest payments averaged more than 10 per cent
lower than their interest payments in 2017–2021.
of government expenditure in 2019–2021, as in
Angola (33 per cent), Bangladesh (22 per cent), the These unsustainable trends show unbalanced debt
Lao People’s Democratic Republic (14 per cent), portfolios, due partly to the rise in debts that are

Figure 3.7
Interest payments on public and publicly guaranteed debt as a share of exports of goods and services
10 2009–2011 2019–2021
9
8
7
6
5
4
3
2
1
0
Afghanistan
Angola
Bangladesh
Benin
Bhutan
Burkina Faso
Burundi
Cambodia
Comoros
Democratic Republic of the Congo
Djibouti
Ethiopia
Gambia
Guinea
Guinea-Bissau
Haiti
Lao People's Democratic Republic
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritania
Mozambique
Myanmar
Nepal
Niger
Rwanda
Sao Tome and Principe
Senegal
Sierra Leone
Solomon Islands
Sudan
United Republic of Tanzania
Timor-Leste
Togo
Uganda
Yemen
Zambia

Source: UNCTAD secretariat calculations, based on World Bank, International Debt Statistics database (accessed March 2023).
Note: Interest payments are just a fraction of debt service cost.

51
The Least Developed Countries Report 2023

for the LDCs, private flows are concentrated in a few

economies, and in any case are not adequate.
A sustained increase in high-value
merchandise exports is needed to As noted in chapter 2, domestic savings, and
hence investments, remain low, thus increasing
maintain debt sustainability in LDCs the pressure to fill the external resource gap with
debt. There is a growing urgency in the LDCs to
achieve the Sustainable Development Goals and
contracted on unfavourable terms despite debt relief other international agendas, including the Paris
efforts through initiatives such as the HIPC and MDRI, Agreement, as well as to implement the Doha
and in the aftermath of the global financial crisis Programme of Action. Investment is key to delivering
(Coulibaly et al., 2019). They also show that LDCs face a vibrant manufacturing sector and a sustainable
a higher exchange rate risk, as their external debts are economy driven by innovation and a well-developed
still predominantly issued in foreign currencies, which infrastructure. For the LDCs, priorities also include
are stronger than domestic currencies. As a result, ending hunger and eradicating poverty, as well as
resources tend to be pooled in a few major currencies, providing clean energy, and water and sanitation,
leaving indebted LDCs with limited choices over among others. Domestic resources are simply not
currencies and credit terms for borrowing. Exchange enough to meet all the investment requirements to
depreciation accounted for some of the substantially fulfil these many goals, but delaying implementation
greater debt vulnerabilities of LDCs as the dollar may also mean paying a higher cost in the future.
appreciated against major currencies and currencies of
Although grants constitute the largest share of ODA,
emerging markets and developing economies during
the current architecture is debt creating, compared
the period 2018–2021 (Obstfeld and Zhou, 2023;
with traditional aid which is associated with grants.
UNCTAD, 2023c). The dollar appreciation affected
Since 2013, the loan component of ODA to LDCs
32 LDCs, which reported that at least 50 per cent of their
had averaged 9 per cent, but it climbed to 15 per
PPG debt was denominated in United States dollars cent in 2020 as borrowing increased during the
during 2019–2021. In only five LDCs, at least one tenth COVID-19 pandemic. Equities, which constitute a
of their PPG debt was valued in Special Drawing Right negligible share of ODA, increased from $48 million
(SDR) units in 2019–2021, while in 25 LDCs at least one in 2010 to $106 million in 2013, but a year later they
fifth of their PPG debt was denominated in currencies declined to $52 million, and remained procyclical
other than the dollar, euro, Swiss franc and SDR units and volatile throughout the period 2015–2021.
(World Bank, International Debt Statistics database, Also, like FDI, equity financing was concentrated in
accessed March 2023). Currency compositions of a few LDCs, with 12 LDCs (Angola, Bangladesh,
debt, unbalanced debt portfolios between long-term Cambodia, the Democratic Republic of the Congo,
and short-term debts, as well as among different Ethiopia, Mozambique, Myanmar, Nepal, Senegal,
categories of creditors with different risk appetites, can Uganda, the United Republic of Tanzania and Zambia)
become challenging in a macroeconomic environment accounting for 85.7 per cent of the investments
that has prevailed since 2021 to the present. In the in 2009–2021. ODA equity investments also pale in
current macroeconomic environment, domestic fiscal comparison to FDI receipts by LDCs which averaged
policy space is therefore important, as it determines $21.4 billion in 2017–2021, although in aggregate
the capacity of the LDCs to leverage all sources of terms, FDI receipts were less than ODA and
financing, including debt, as well as their potential to remittances, respectively, in 2000–2021.
build the economic depth needed to retire debts in the
Total FDI receipts peaked at $38.6 billion in 2015,
future.
before plunging to $18.3 billion in 2018.2 Total FDI
b. Misalignment of official development assistance receipts of LDCs were consistently lower than net
architecture with least developing countries’ inflows of personal remittances in 2000–2021, and
development needs in 2021 they were lower than the average for the period
2016–2018 in 19 LDCs (Afghanistan, Bangladesh,
Grants and concessional finance were traditionally
Burkina Faso, the Comoros, Guinea, Haiti, the Lao
associated with ODA, but since the global financial
People’s Democratic Republic, Lesotho, Liberia,
crisis, the share of debt in ODA flows to LDCs Madagascar, Malawi, Myanmar, Rwanda, Sierra
has increased, and so too has private credit on Leone, Solomon Islands, the Sudan, Tuvalu, the
commercial terms (UNCTAD, 2019 and 2021). Private
investment flows and portfolio investments normally 2
The data is from World Bank, World Development Indicators
fill the financing gap in other developing countries, but database, accessed March 2023.

52
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

investors are also attracted by growth prospects

offered by natural resources, security guarantees for
Making LDC debt financially their investments and liquidity in the financial system.
sustainable requires: As a result, financing models for attracting blended
finance, whether from ODA, equities or FDI, tend to
overburden the public purse with credit guarantees,
tax waivers, subsidies, and other concessional
terms. Given that private sector investors are rational
and tend to take calculated risks, the low private
INCREASED investment in the sector may imply a capital market
GRANTS problem rather than a public finance problem.
Where commercial banks or private lenders can
effectively serve investors and absorb the associated
TANGIBLE
TARGETS ON investment risk in the productive sector, it is inefficient
DEBT RELIEF and counterproductive for the government to offer
unlimited external credit guarantees to investors
(UNCTAD, 2019; Delevic, 2020).
MORE
CONCESSIONAL c. Increasing frequency of trade shocks and widening
LOANS trade gaps
The external solvency of LDCs mainly depends on
their export earnings. Fluctuations in export earnings,
which are linked to commodity price movements,
supply-side bottlenecks and exogenous shocks, are
a major source of balance-of-payments imbalances
United Republic of Tanzania and Zambia). However, in these countries. Volatile export earnings exert
FDI receipts in LDCs recovered in 2019–2021, pressure on government revenues, foreign currency
despite low investor confidence associated with the reserves, exchange rates and domestic prices of
COVID-19 pandemic. Although total FDI receipts tradeable goods.
reached $25.2 billion in 2021, they remain insignificant
Primary commodities have endured a sustained
compared with personal remittances that have been
deterioration in terms of trade, as evidenced by their
rising steadily since 2017 and reached $55 billion
declining share in world trade. In 2022, 65 per cent
in 2021. The top five recipients of FDI among LDCs
of LDC exports were primary commodities (including
in 2021 (Mozambique, Ethiopia, Cambodia, Senegal,
fuels), and their value was a mere 0.7 per cent of
and Myanmar, in that order) accounted for 68.7 per
total world exports. Put differently, LDCs contributed
cent of total net receipts, while Angola and Zambia
just 2.2 per cent to world exports of primary
saw net FDI outflows. The low volume aside, receipts
commodities, including fuels. The trade deficit of
fluctuated considerably, reflecting the marginalization
LDCs widened from $43 billion in 2013 to $90 billion
of LDCs in global financial markets, the nature of
in 2015, and slightly recovered in 2016–2020, before
investments they attract – which mostly target
slipping again in 2021 as well as 2022 as world trade
minerals, fossil fuels, power generation and other
normalized (figure 3.8). This was largely driven by a
selected sectors – and the inability of some LDCs that
growing merchandise trade deficit with the rest of
have weak productive capacities to stimulate further
the world. Specifically, LDCs were net importers of all
investments and domestic linkages.
food items (SITC 0 + 1 + 22 + 4) and manufactured
Leveraging private capital towards national goods (SITC 5 to 8 less 667 and 68) in 2016–2021,
development priorities is a challenge for many LDCs and their trade surplus in fuels (SITC 3) has declined
because the domestic policy environment alone is since 2018. Discounting the net trade impact of
not adequate to attract private capital flows, even fuels, imports of LDCs would have fallen by 11.5 per
when deliberate policies are put in place to target cent, but exports would have contracted by 23.4 per
the private sector. Capital flows to markets with cent during the period 2016–2021. Thus fuels have
low risk, but the investment risk ratings for LDCs contributed significantly to narrowing current account
are often unfavourable, and are often affected by deficits for LDCs as a group, but they also worsen the
credit rating downgrades. Apart from the business deficit among non-oil exporters when the price of oil
environment created by competent and quality remains inflated as it has been since the onset of the
government institutions and the civil service, recovery from COVID-19.

53
 The Least Developed Countries Report 2023

Figure 3.8
Least developed countries’ total trade in goods and services
at current prices, 2005–2021
The growth rate of debt stocks
400 outpaced that of export earnings,
350
300 implying elevated debt risks
Billions of dollars

250
200 Growth rates, 2013–2021 (percentage)
150

+80
100
50
0
-50 -10 -3 -3 -7 -15 -19
-100
-33 -35 -43
-69 -71 -66 -64 -76 -61 -77 -78
public debt stock
-90
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Exports Imports Trade balance 2022

Source: UNCTAD secretariat calculations, based on UNCTADStat database

(accessed March 2023).

World merchandise trade reached $24.8 trillion

in 2022, up from $17.5 trillion in 2020, with
manufactured goods accounting for 64 per cent

+20
of total merchandise exports.3 The value of world
exports of primary commodities (excluding fuels),
precious stones and non-monetary gold increased
from $3.1 trillion in 2020 to $4.2 trillion in 2022, but exports of goods
as a share of world exports, it declined marginally and services
from 17.9 to 16.9 per cent. World exports of
manufactured goods rose by $3.5 trillion (28.1 per
cent growth) in 2022 compared to 2020. For LDCs,
merchandise exports reached $275 billion in 2022
compared to $184.5 billion in 2020, as world trade
recovered from pandemic-related shocks. However,
LDCs’ export structure is undesirably concentrated in
commodities, with the share of primary commodities, commodities, with limited domestic value addition in
including fuels, amounting to 64.7 per cent of exports manufactures (UNCTAD, 2019, 2021 and 2022b).
in 2022 compared to 63.8 per cent in 2020, as Primary commodity exports also expose LDCs to price
the share of fuels recovered from 16.9 to 23.8 per fluctuations and market instability. To illustrate the
cent of LDC exports in 2020–2021. The share of vulnerability of commodity exporters to trade-related
manufactured goods shrank from 35.4 per cent systemic shocks, consider the trend of the top five
in 2020 to 34.4 per cent in 2022, while the share of LDCs ranked by merchandise export value in 2021:
ores, metals, precious stones and non-monetary gold Bangladesh, Angola, the Democratic Republic of
fell by 2.9 percentage point in 2022 compared to 2020, the Congo, Cambodia and Myanmar. The cyclical
even though their export value rose from $55.1 billion pattern of exports shows that there were at least
to $74.2 billion in 2020–2022. It will be important four negative shocks to their exports in 2005–2021,
for LDCs to increase the share of manufacturing in particularly in 2009, 2014, 2018 and 2020. Their
their exports if they are to play a significant role in exports either fell or rose as the shocks played out
world trade, and for trade to contribute to narrowing in subsequent years (figure 3.9). Angola’s exports
their balance-of-payments deficits. This can only suffered major trend digressions in 2009, 2015, 2016
be achieved by accelerating structural change, and 2020, with huge slumps in its fuel exports as oil
expanding into relatively higher productivity activities, prices crashed. And in the Democratic Republic of
and reversing decades of specialization patterns that the Congo and Bangladesh, supply chain shocks
have skewed production and trade towards primary suffered during the COVID-19 pandemic inflicted a
larger negative impact to exports compared with the
3
UNCTAD calculations based on UNCTADStat, accessed relative gains by both countries from positive price
June 2023. shocks in 2016–2019, especially by the Democratic

54
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

Figure 3.9 their economic growth and balance of payments.

Cyclical component of exports, selected countries,
4 Building productive capacities, diversifying the export
2005–2021 base, and structurally transforming their economies
Panel A could contribute to reducing the impacts of trade
shock due to an excessive concentration of exports
6 000
(UNCTAD, 2020b; 2022b). The lack of diversification
4 000 of exports is also associated with larger swings in
the cyclical component of export trends, and lowers
2 000 the mean trend growth rates of exports and GDP
respectively.
0
d. Domestic debt and recourse to foreign sovereign
-2 000
bonds
-4 000 An increase in claims on central governments, which
includes loans to central governments net of deposits,
-6 000
may signal a growing debt problem, especially if
2005
2006
2007
2008
2009
2010
2011
2012
2013

2015
2016
2017
2018
2019
2020
2014

2021
government domestic debt consistently dominates
Bangladesh Democratic Republic of the Congo
Cambodia Myanmar
credit issued by the financial sector. Credit to the private
sector increased slightly, from an average of 21 per
cent of GDP in 2015 to 24 per cent in 2020, while
Panel B – Cyclical component of Angola's exports, 2005–2021 claims on central governments declined by almost a
15 000 similar margin, from 26 per cent in 2015 to 24 per cent
10 000
in 2020. The private sector’s demand for credit is often
driven by requirements for investment capital and cash
5 000
flow to cover operating costs and business operations.
0
When the government dominates the domestic credit
-5 000 market, liquidity constraints on the private sector may
-10 000 push up borrowing costs and demand for short-term
-15 000 credit by firms, as investors prefer short-term projects
over longer term investment projects that offer lower
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

returns (Fosu and Abass, 2019).

Fuel exports Total merchandise exports
Among LDCs for which data were available, domestic
Source: UNCTAD secretariat calculations, based on UNCTADStat database
(accessed March 2023). credit provided by the financial sector as a share of
GDP averaged 32.3 per cent in 2020, compared
Republic of the Congo. Cambodia’s exports to 15.5 per cent in 2015. During the same period,
performed better during the pandemic, bolstered domestic credit to their governments increased
by its strategic geographic location and proximity to slightly, from an average of 5.1 per cent of GDP to
major trade routes in South-East Asia. 7.7 per cent, while domestic credit to the private
sector increased from 20.9 per cent to 23.9 per
The cyclical pattern of exports also shows that recent cent of GDP. Domestic debt in local currency is
trade shocks have been more pronounced, resulting considered safer because it entails lower exchange
in LDCs suffering major setbacks in exports. This rate risk when the issue is traded locally and held
made them more vulnerable to debt, as the shocks predominantly by residents. For 22 of 36 LDCs for
eroded export revenues and slowed economic which data were available, domestic debt as a share
growth. It is critical for the LDCs to break this cyclical of GDP rose during the period 2021–2023 compared
pattern of exports because of its adverse impact on to 2018–2020, and remained above 30 per cent in
five countries: Malawi (36 per cent), Guinea-Bissau
4
The Hodrick and Prescott (HP) filter is a procedure for (40 per cent), the Democratic Republic of the Congo
decomposing a time series, xi, i = 1, …, n into a trend
(43 per cent), Burundi (48 per cent) and Zambia
component, ti and a cyclical component, ci, which
measure the deviation from the long-term growth of (54 per cent) (figure 3.10). The ratio of domestic
the variable (i.e., ci = (xi – ti)). The trend component debt to GDP declined in 2021–2023 for the Gambia
is estimated from solving a constrained minimization (33 per cent) and Togo (36 per cent) compared
problem of the squared digression from trend:
min ∑ni= 1 (xi – ti)2 + λ ∑i = 2 (ti + 1 – 2ti + ti – 1)2, for λ > 0. For
to 2018–2020, but nevertheless remained above
more details, see Cornea-Madeira, 2017 and de Jong and 30 per cent, while in Angola it fell significantly, from 35
Sakarya, 2016). per cent to 17 per cent over the same period.

55
 The Least Developed Countries Report 2023

Figure 3.10
Domestic debt as a share of gross domestic product, 2018–2020 and 2021–2023
60

Zambia

50
Burundi
Democratic Republic
of the Congo

Guinea-Bissau
40
Malawi Togo
Gambia
2021–2023

30
Senegal Burkina Faso
Mozambique
Mali Chad
Rwanda
Lesotho Niger Liberia Bangladesh Sierra Leone
20
Uganda Angola
Central African Benin Ethiopia
Republic
Madagascar Guinea
Solomon Islands Haiti United Republic of Tanzania
10
Bhutan
Myanmar
Comoros Sudan Mauritania
Tuvalu Djibouti
0 Afghanistan
0 10 20 30 40 50 60

2018–2020
Source: UNCTAD secretariat calculations, based on various IMF Staff Country reports (accessed June 2023).
Note: Data for 2023 are projections.

In general, domestic public debt backed by tax higher than tax revenue as a percentage of GDP
revenue and other domestic resources mobilized in some LDCs, including Angola, Bangladesh, the
by the government may slash resource gaps at Central African Republic, Myanmar and the Sudan,
lower cost when fiscal discipline is complemented and only marginally higher in Zambia. In 2019–2023,
by central bank independence in domestic credit domestic debt as a share of GDP exceeded tax
allocation. A trade-off between external debt and revenue in 24 of 39 LDCs, including Zambia, Burundi,
domestic debt may arise due to costs associated with the Democratic Republic of the Congo, Togo,
currency and maturity mismatches, as well as from Guinea-Bissau, the Gambia, Malawi, Chad, Burkina
a desire to lower the risk of international exposure Faso and Sierra-Leone (figure 3.11). Critically,
(Panizza, 2008; United Nations, 2023b). However, claims on central government as a percentage of
maintaining credibility in government financing and broad money grew at average rates of more than
spending decisions is crucial, as repressive financial 10 per cent in 2016–2020 compared to 2011–2015
policies may reduce the creditworthiness of debt in Angola, Burundi, Liberia, Sierra Leone, South
denominated in domestic currency, especially in Sudan, the Sudan and Zambia. In South Sudan
contexts of high inflation and low growth (Amstad and the Sudan the growth rates were high in both
et al., 2020). As noted earlier, interest rate hikes periods. The credibility of the financial sector in these
in 2021–2023 impacted liquidity and balance countries could deteriorate if their fiscal positions
sheets amidst inflationary pressures, which saw the are left unchecked. Thus the onus is on both central
consumer price index almost quadruple in LDCs, governments and monetary authorities to commit to
from an average of 390 in 2018 to 1,489 in 2021. viable inflation targets, and to maintaining prudence
The ongoing adjustment to interest rates in 2023 has in spending policies.
raised domestic debt costs and piled pressure on
In the context of a fragmented external financing
already constrained fiscal spaces.
landscape and liquidity constraints in LDCs’
The vulnerability of the domestic financial system domestic financial markets, some of these countries
to domestic credit risk may be low for LDCs in have resorted to issuing foreign bonds abetted by
which tax revenue exceeded domestic credit to commodity windfalls and sizeable foreign reserves.
government relative to GDP. However, claims on Between 2009 and 2022, African LDCs issued a
central government net of deposits were significantly combined total of $23.1 billion worth of Eurobonds,

56
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

Figure 3.11
Share of least developed countries’ public financial positions in gross domestic product, 2019–2023 (percentage)

14.8

14
26.6 23.4 16 11.5
46.8 40.3
51.4 39.3 33.7 24.2 21.4 16.6 6.8
25.3 18.1 14.7
24.8 22.2 9.4
36.8 33.7 19.8 18.2 16.4 15.9 15.7
13.7

0
20.7
14.8
21.5 23.8 24.1 19.9 12.2 14.3 21.6 26.2 17.9 14.7 21.1 26 14.7 19.8 8.7 13.6 14 16.4 20.4 13 24.3 13.3 11.4 48.8 17.1 31.3 10.3 24.9 15.7 19.7 19.7 9.9 24 18.8 9.6 81.5 21.9 13.1 16.3 10.2
-6

-20.4
Zambia
Burundi
Democratic Republic of the Congo
Togo
Guinea-Bissau
Gambia
Malawi
Chad
Burkina Faso
Sierra Leone
Angola
Mozambique
Lao People's Democratic Republic
Mali
Bangladesh
Ethiopia
Uganda
Liberia
Senegal
Guinea
Rwanda
Benin
Niger
Haiti
Lesotho
Central African Renublic
South Sudan
Madagascar
United Republic of Tanzania
Myanmar
Bhutan
Mauritania
Sudan
Solomon Islands
Djibouti
Comoros
Tuvalu
Cambodia
Afghanistan
Sao Tome and Principe
Somalia
Timor-Leste
Revenue, per cent of GDP Domestic debt, per cent of GDP Primary balance, per cent of GDP
Source: UNCTAD secretariat calculations, based on various IMF Staff Country reports (accessed June 2023).
Note: Only countries shown for which data were available. Data for 2023 are projections.

denominated mostly in United States dollars. The analysis of the issued Eurobonds shows that they
interest rates on these instruments are quite high, have been used to finance maturing debt obligations,
for example LDCs paid between 5 and 10 per cent fiscal budget deficits and large infrastructure projects
on 10-year bonds, compared to almost zero, and (Mureithi, 2021; The East African, 2023; and
in some cases negative, rates in the United States Smith, 2023). Benin is the first African LDC to have
and Europe in 2019. This is in part due to LDCs’ issued an SDG Eurobond dedicated exclusively to
poor credit ratings, and a mismatch between the financing high impact projects aimed at achieving
instrument’s duration and its use (Mureithi, 2021). An the Sustainable Development Goals (box 3.1).

Box 3.1 Benin’s inaugural Sustainable Development Goals bond issue

In July 2021, Benin issued its inaugural Eurobond to finance projects related to the Sustainable Development Goals.
The Government prioritizes the most urgent Goal targets, and projects are selected based on their "SDG sensitivity".
A total of 57 projects are eligible, grouped into 12 categories based on a comprehensive set of criteria that define
the context of the intervention and the scope of expenditures. The projects are further classified into four pillars of
the Goals, namely population (with an allocation of 72.2 per cent of the funding), prosperity (11.1 per cent), planet
(14.9 per cent) and partnerships (1.8 per cent) (Benin, Presidency, 2022).
A steering committee selects eligible projects according to a set of criteria. Certain activities are excluded from
funding, such as expenditures on fossil fuels, tobacco, alcohol, gambling, production and trade in arms, or defence
and security equipment. By July 2022, the following goals had been achieved:
• Reached 2.6 million beneficiaries of an extended vaccination programme (1.1 million of whom are children
younger than 1 year).
• Provided free malaria treatment to almost 700,000 poor people.
• Extended and densified drinking water distribution networks from 321 km (2017) to 859 km.
• Opened 16 programmes as part of the creation of the City of Innovation and Knowledge project, benefiting
1,647 people.
• Increased coverage to 25 municipalities (approximately 5.7 million people) of the PANA Energy Project, which
seeks to improve the resilience of the energy sector to the impacts of climate change.
• Installed 13 climate resilient solar PV mini power plants in some off-grid locations in Benin.
• Set up and operationalized an interoperability platform for all government ministries of Benin.
• Restored 150 hectares of the coastal zone.

57
The Least Developed Countries Report 2023

Box 3.2 The African regional bond market: Growth potential but inflated borrowing costs

African LDCs are tapping into the regional bond market, which is supported by the African Development Bank
(AfDB) and other subregional development banks. The AfDB bond portfolio is denominated in various foreign
currencies. It includes social bonds (AfDB, 2017), green bonds, and environment, social and governance (ESG)
bonds (AfDB, 2022). In 2022 alone, the AfDB issued a 1 billion euro 5-year social bond and a 1.25 billion euro
7-year social bond, a 1.5 billion Swedish krona 5-year green bond and 19 billion Ugandan shillings ESG bond
(approximately $5 billion) (AfDB, 2022). As at 30 June 2022, the AfDB had committed $3.8 billion to 45 eligible green
projects and $6 billion to eligible social projects across Africa.
Subregional development banks too have engaged in issuing bonds to finance some projects in their portfolios. The
ECOWAS Bank for Investment and Development issued a 240 billion West African CFA Franc (XOF) bond programme
on the financial market of the West African Economic and Monetary Union (WAEMU) in 2021 (EBID, 2021). The
Eastern and Southern African Trade and Development Bank issued a 7-year unsecured Eurobond valued at $650
million, and it is in the process of developing a regional local bond issuance programme as a way to diversify
its bond issuances (TDB, 2021). The West African Development Bank (BOAD) successfully issued a €750 million
sustainability bond in 2021 aimed at increasing funding for projects intended to have strong social and environmental
impacts in WAEMU countries. The bond has a 12-year maturity, and debuted with an interest rate of 2.75 per cent
(BOAD, 2021).
Compared to the Eurobond market, the regional and subregional development banks focus on high-impact projects
that have an environmental sustainability component. However, bonds in this segment still attract higher interest
rates than bonds issued in developed economies. Boosting capitalization of the regional bond market could unlock
financing, particularly for corporate sector borrowers seeking growth markets in the African Continental Free Trade
Area. Market capitalization of corporate bonds as a percentage of GDP in sub-Saharan Africa was only 1.8 per cent,
while market capitalization of government securities averaged 14.8 per cent in 2010 (Mu et al., 2013). The size of the
economy and its level of development along with the size and level of development of the banking sector, are critical
considerations for investors. At the same time, investor confidence in the market is strongly influenced by trade
openness, the quality of institutions, investment profiles, and macroeconomic conditions (including fiscal balances,
interest and exchange rates), as well as the presence or absence of capital controls (Mu et al., 2013; Essers et
al., 2014; Eichengreen and Luengnaruemitchai, 2004; Berensmann et al., 2015). The fact that bond issuances
by African LDCs are oversubscribed demonstrates strong investor interest in the African market. However, the
scope for expanding the issuance of bonds will continue to be constrained by exorbitant costs, market risks and
higher premiums on rollover risks. Recourse to foreign bond issuances is therefore contributing to undue debt
accumulation in African LDCs.

The projects aim to provide important social and to focus on reducing the debt burdens of these
human development benefits, but very few of them low-income countries. However, the fragmentation
have revenue-generating potential, and therefore do in the international financial assistance architecture,
not necessarily help reduce the country’s indebtedness. as discussed in chapter 2, particularly among Paris
Rwanda recently issued a $620 million foreign bond to Club and non-Paris Club official creditors, along with
boost strategic projects in productive sectors, and to other shortcomings, will continue to enhance the debt
retire its debut $400 million Eurobond that matured vulnerabilities of the LDCs. The Global Sovereign
in May 2023 (The East African, 2023). The matured Debt Roundtable launched in December 2022 by the
10-year bond issued in 2013 debuted at an interest World Bank, IMF and the Group of 20 (CDP, 2023)
rate of 6.62 per cent, while the new bond was listed reconvened in April 2023 in Washington, D.C., during
at 5.5 per cent, with 84.5 per cent of existing bond which parties showed a greater willingness to address
holders from previous bond issues retained. Investor sticky issues. These include guarantees to protect the
confidence lends credibility to government policies, and interests of multilateral development banks (MDBs)
could improve the viability of public projects on which and common treatment of sovereign creditors.
the debt resources are spent (Smith, 2023; Rwanda, The MDBs are expected to offer more grants and
Ministry of Finance and Economic Planning, 2023). concessionary lending which, in the case of the World
Bank, would require expanding the pool of resources
C. Multilateral and bilateral debt available to low-income countries, including the IDA/
World Bank Fund for the Poorest (Gold and Saldinger,
relief initiatives 2023; IMF, 2023b).
LDCs require urgent support to prevent their debt Debt relief may be offered in various ways, including
situation from turning into a wider systemic crisis. through debt cancellation, restructuring, reduction of
Global efforts by the international community need stock or debt service obligations, and debt service

58
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

suspension. It should be noted, however, that the

Group of 20 Common Framework, discussed below,
seeks to broaden debt relief from official and private
Fulfilled pledges and predictability of
creditors on comparable terms, and to facilitate faster grants and concessional loans could
debt rescheduling through maturity extensions and improve liquidity of debt-distressed LDCs
interest rate reduction rather than through outright
debt cancellations (UNCTAD, 2023b). Official bilateral
creditors may find it easier to offer debt cancellations
assistance in the form of grants and concessional
when they are the main debt partner, but other
loans. Difficulties in accessing international capital
incentives, such as trade and investment linkages,
markets raises the cost of borrowing for LDCs,
may also play a role. On the other hand, imprudent
they often resort to syndicated loans with shorter
behaviour of private agents and fragmented
maturities and borrowing from private creditors
interests among sovereign lenders may give rise to
who offer no safeguards at times of debt distress.
ad hoc arrangements and protracted debt workout
This is one of the reasons for the marked increase
negotiations (UNCTAD, 2015). Debt cancellation
in their costs of debt service. Countries that are at
may involve partial or full reduction of debt either
risk of – or are already experiencing – debt distress
through the principal component and/or interest; debt
will need to safeguard their fiscal space as a matter
restructuring, on the other hand, alters the terms of
of urgency in order to prevent further erosion due to
a debt, often in favour of a debtor, and could involve
the ramifications of the polycrisis. For these countries,
debt write-offs to reduce the principal and interest,
the international community should address not only
or a change in the timing of debt repayments. It is
immediate liquidity pressures, but also their structural
common for creditors to offer only rescheduling of debt
insolvency and long-term debt sustainability issues
to resolve liquidity problems, but treating insolvency
(UNCTAD, 2020c).
alone is not effective. Suspending debt service, as well
as other measures taken during debt restructuring are The importance of international coordination of the
only effective if the debtor country prudently utilizes debt relief efforts of official bilateral and multilateral
the proceeds of the restructured debts and/or any creditors, commercial banks and other private
additional flows it receives during the process. lenders cannot be overemphasized. For many years,
UNCTAD has been advocating for a multilateral
At the present juncture, LDCs require more financing
framework for debt resolution – a process that
options at scale, and on conditions that are favourable.
would require coordination among official multilateral
Because of their weak economies and high vulnerability
and bilateral creditors as well as private creditors
to economic shocks and other crises, the most
(UNCTAD, 2015, 2020c, 2023a). Official creditors
suitable external financing for LDCs, other than more
would be familiar with the complexity of achieving
expensive private financing options, should include
compatibility and coherence in debt treatment clauses
an increase in ODA grants and concessional loans.
among creditors when a country requests debt
There is therefore a need for more precise targets
restructuring from its creditors. Although it is arguably
and predictable amount of financing on grant and
easy for parties to agree debt restructuring terms
concessional terms. An increase in such flows could
when creditors share common views on debt, for
reverse the unsustainable debt trends, balance the debt
example among Paris Club members, it takes longer
profiles between commercial and private debt stocks,
to build consensus with other official bilateral and
and increase multilateral and bilateral share of debts
private creditors (commercial banks, bond holders
offered on sustainable terms. A reformed international
and other private creditors) because of differences in
financial architecture could achieve some of these aims
by facilitating the most vulnerable countries’ access approach, valuation of debt and commercial interests
to liquidity and addressing their long-term financing (Goldman, 2014; UNCTAD, 2015). The discussion
needs, including making the financial architecture in this section focuses on selected multilateral
more responsive to their requirements in times of frameworks for debt relief and their relevance to the
crises (United Nations, 2023c). The discussions that present debt situation of the LDCs.
follow highlight some debt relief initiatives, and the a. United Nations initiatives for debt workout
scope for improving their impacts on LDCs.
The 2008–2009 global financial crisis was a setback
for the MDRI launched by the IMF in 2006. As debt
1. International cooperation on debt relief situations worsened, it became increasingly clear
LDCs facing debt burdens require urgent injections of that there was need for an effective, coordinated
liquidity through various instruments, including official international debt workout plan for debt distressed

59
The Least Developed Countries Report 2023

The Least Developed Countries Report 2021

(UNCTAD, 2021) called for the setting up of a
Debt workout mechanisms, beyond contingency financing facility to ease debt service
providing liquidity support, should for countries when specific factors affect their ability
also address the structural to service their debt, such as natural disasters, wars
or geopolitical tensions, which have an adverse
vulnerabilities of LDCs
impact on their GDP or commodity exports, or any
other factors that might increase their vulnerability to
shocks. Depending on credit terms, the debt service
countries that depended not just on a limited number of countries experiencing such unexpected events
of creditors, but rather, on the entire spectrum of could, for example, be automatically suspended until
official multilateral and bilateral lenders, as well as such time as their interest repayments do not exceed
private creditors. A multilateral approach to debt their GDP growth rate and other income-indexed
resolution is still needed to improve coordination measures. The practicality of state-contingent
among creditor and debtor countries through debt instruments6 was tested during the COVID-19
negotiations to prevent sovereign debt defaults. pandemic and reviews of their usefulness abound.
By facilitating and accelerating the process of debt For instance, the instrument only becomes active
resolution between countries and their creditors, when disaster or crisis strikes, resulting in huge losses
such a framework would help maintain investor to the economy. If the contingent event is global,
confidence during debt workouts. And by avoiding lenders may also be exposed to the same risks, and
protracted negotiations over debts, it would directly therefore may not be inclined to offer relief (Cohen et
improve confidence in the sovereign States involved. al., 2020). In general, rescheduling of debt, including
This is important for LDCs because these countries standstill provisions, does not solve debt crises other
often suffer from negative perceptions by investors, than postponing the inevitable, but reduction of
even when their sovereign debts are low. Moreover, a the present value of debt goes a long way towards
multilateral framework could offer stability and fairness reducing debt.
unlike bilateral arrangments with private and official
creditors which may fail to guarantee sustainability for
2. Bilateral debt relief and South–South
poor lenders in debt distress.
cooperation
General Assembly resolution 69/319 on Basic
Principles on Sovereign Debt Restructuring Bilateral debt relief plays an important role in
Processes adopted in September 20155 specifically reducing the debt burdens of LDCs. During the
aimed at promoting accountability, transparency period 2006–2021, LDCs received $25.2 billion
and cooperation between debtors and creditors in in ODA debt relief, most of it between 2006 and
resolving debt situations. Among its principles is the 2014 (figure 3.12). However, official bilateral flows
need to safeguard the policy space of the debtor related to debt relief have been falling, accounting
country to exercise its discretion in the design of its for only $1.6 billion during the period 2019–2021.
macroeconomic policy, including the restructuring of its The top five recipients were the Democratic
sovereign debts, and crucially, that debt restructuring Republic of the Congo (32 per cent), Myanmar (20
should be a last resort (United Nations, 2015). The per cent), Liberia (7 per cent), Somalia (6 per cent)
resolution is hailed as a standard bearer on setting and Bangladesh (5 per cent). Beneficiaries during
principles for treating protracted debt situations. the period 2006–2021 were Togo (4 per cent), the
Although the nine principles contained in the United Republic of Tanzania (4 per cent), Zambia (4
resolution are non-binding, they set the bar for debt per cent), and Guinea (3 per cent). During the period
resolution workout mechanisms that seek to address 2015–2020, debt forgiveness or reduction amounted
the needs of developing countries. Obviously, debt to $3.3 billion, and rescheduled debt was $0.4 billion,
workouts should go beyond debt rescheduling and but new external debt contracted by LDCs reached
debt service suspension, as these do not resolve the $200.5 billion, eclipsing the additional $167.4 billion
debt crises of low-income countries. For some of the
countries, a reduction in the present value of debt
would have a significant impact and help bring debt 6
State-contingent debt instruments (SCDIs) are debt
to sustainable levels. instruments that link a sovereign’s debt service payments
to its capacity to pay, depending on world variables or
events. The contingencies have to be defined in advance
5
See https://daccess-ods.un.org/tmp/7142791.15200043. so that when conditions are met, the country can avert a
html. debt crisis.

60
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

debt accumulated during 2007–2014.7 More than Figure 3.12

half of the new external debt (62 per cent) was public Official development assistance debt relief received by least
and publicly guaranteed. The mismatch between developed countries, 2006–2021
debt relief received and the newly contracted debt 6 000 5 798

shows that LDCs are facing not only large-scale

5 000
financing challenges, but also debt management 4 587

Millions of dollars
4 000
problems that keep their overall indebtedness at 3 131
unsustainable levels. The drying up of aid and debt 3 000
2 476 2 529

relief was particularly apparent in 2015–2021, when 2 000

2 084

debt stocks and debt service costs escalated. 1 000 845 803
1 271
872
693
224 220 82 75
Looking ahead, there is the need for substantial 0
57

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
liquidity support to LDCs in debt distress or at risk
of distress. Developed countries also need to scale Source: UNCTAD secretariat calculations, based on data from OECD Creditor
up disbursements of official flows, including ODA, in Reporting System database (accessed April 2023).
line with their commitments, as the financing gap also
carries a cumulative negative impact on development impacts that increase insolvency risks of the recipient
in low-income countries. Some of the short-term loans countries. Establishing the real capacity of LDCs to
accumulated by the LDCs, for example, arise from repay debt is therefore critical in resolving their debt
their need to bridge the gap between commitments crisis in the long-term, in addition to substantially
and disbursements from official creditors, as well reducing the present value of their debts stocks
as higher future costs of postponed investments. (Chuku et al., 2023; UNCTAD, 2021b).
South–South sharing of experiences on debt
Frequent situations of debt overhang and increased
management issues, including assessing public and
demand for emergency lending and debt restructuring
external finance needs, is critical for countries that are
simply confirm that the debt vulnerabilities of the
in debt distress or at risk of distress. The UNCTAD
LDCs have reached crisis level. Bilateral partners
Sustainable Development Finance Assessment
could increase aid flows to the stricken countries,
Framework, for instance, provides policymakers with
and by providing debt relief, they could broadly help
tools for assessing whether their countries are on
those countries deal with debt overhang and free up
track to meeting existing external debt obligations
resources for more social spending. The latter was the
without compromising their ability to achieve the
focus of G7 debt relief considerations from as far back
Sustainable Development Goals.8
as its meeting in Toronto, Canada, in 1988,when partial
Debt relief provided by official creditors can be more debt forgiveness, longer maturities and low interest
effective if it involves a comprehensive reduction of rates were highly recommended (Bjerkholt, 2004).
debt stocks with corresponding cuts in debt service In 1990 at its meeting in Houston, United States, the
costs (UNCTAD, 2020c). Of course, the nature of G7 called for more concessional rescheduling for the
LDC’s debt problems varies, from short-term liquidity poorest countries, and for increasing the grant element
problems related to a shortfall in tax revenues due to of debt reduction from about 27 per cent to 67 per
economic shocks, to long-term insolvency linked to cent (Easterly, 2002). This was in recognition of the fact
structural economic weaknesses. The effectiveness that debt rescheduling alone was inadequate to bring
of bilateral debt relief in these instances depends on down debts unless additional steps were taken by the
how aid flows assist the recipient country smoothen international community to decisively deal with the
its fiscal revenue gap in the short-term, while also crisis. At the same time, beneficiaries of substantive
addressing its long-term structural limitations. debt reductions would also need to urgently implement
However, with ODA already low, bilateral aid flows structural reforms and channel new resources towards
earmarked for debt relief should not be substitutes building productive capacities and improving their
for other types of aid, as doing so would add to the trade performance (Easterly, 2002; UNCTAD, 2020b).
unpredictability of aid flows and worsen the procyclical
The Group of Seven is currently aligned with the
Group of 20 on debt issues, and in particular, the
7
UNCTAD secretariat calculations based on World member States are committed to working closely
Bank, International Debt Statistics database (accessed with the Group of 20 and international organizations
June 2023). to, among others, “advance the work on multilateral
8
The framework has been applied to a number of countries,
development banks evolution; promote voluntary
including Indonesia and Sri Lanka, under the Debt
Management and Financial Analysis System (DMFAS) SDR channelling; secure resources for Poverty
programme (Lockwood, 2022). Reduction and Growth Trust and Resilience and

61
The Least Developed Countries Report 2023

Sustainability Trust; address debt vulnerabilities” Figure 3.13

(European Council, 2023: paragraph 7). During the Public and publicly guaranteed debt service of least
COVID-19 pandemic, the Group of 20 announced developed countries, 2020 and 2021 (millions of dollars)
a Debt Service Suspension Initiative (DSSI) to assist 2020 2021
low-income countries facing liquidity problems. The Afghanistan 29 19
Angola 6 963 8 881
initiative waived debt service obligations for 73 eligible Bangladesh 2 014 2 772
Benin 211 727
countries, of which 41 were LDCs. Of the $5.4 billion Bhutan 47 116
debt service deferral extended by bilateral creditors Burkina Faso 136 143
Burundi 14 19
in 2021, 21 LDCs that regularly report their data to Cambodia 359 396
Central African Republic
the World Bank benefited from about $2.1 billion in Chad
5
111
7
150
deferred debt service.9 Comoros 3 3
Democratic Republic of the Congo 256 348
Djibouti 53 43
a. Group of 20 Common Framework for Debt Treatments: Eritrea 22 22
Beyond the Debt Service Suspension Initiative Ethiopia 1 970 1 989
Gambia 27 31
Guinea
As the DSSI – launched during the pandemic – expired, Guinea-Bissau
74
23
109
43
the Group of 20 announced a new initiative in 2022 Haiti 10 15
Lao People's Democratic Republic 640 665
aimed at assisting countries facing protracted debt Lesotho 60 298
Liberia
problems. The framework offers no debt write-off or Madagascar
24
104
18
129
cancellation, but it is envisaged that such measures Malawi 73 81
Mali 229 270
may apply if a country meets certain IMF/World Bank Mauritania 270 397

criteria, and if all participating creditors collectively Mozambique 607 584

Myanmar 508 2 227
consider the case to be deserving of such treatment Nepal 256 263
Niger 173 192
(Paris Club, 2021). The Common Framework may Rwanda 113 647
broaden the participation of creditors in addressing Sao Tome and Principe 2 2
Senegal 1 576 1 442
long-standing debt resolution constraints, since Sierra Leone 51 55
Solomon Islands
it is endorsed by the Paris Club and other major Somalia
6
481
6
17
non-Paris Club members. However, there are still Sudan 144 1 621
United Republic of Tanzania 1 199 1 544
many official creditors who have not endorsed it, Timor-Leste 8 10
Togo
due to unresolved questions about burden-sharing Uganda
86
312
105
590
by official bilateral creditors, the role of MDBs, and Yemen 86 91
Zambia 569 241
eligibility for debt treatment, which depends on LDCs* 19 903 27 328

the IMF/World Bank Debt Sustainability Analysis Source: UNCTAD secretariat calculations based on World Bank, International
Framework for Low-Income Countries. Debt Statistics database (accessed May 2023).
Note: Data for Kiribati, South Sudan and Tuvalu are not available.
At present, the impact of the Common Framework on
debt distressed countries is minimal, since countries Mauritania (53 per cent), the Comoros (45 per cent),
have to apply on a case-by-case basis. Besides and Sao Tome and Principe (44 per cent) (table 3.1).
eligibility, the financial impact of the entire process
is a major concern. For instance, despite the DSSI Other official creditors of developing countries,
extending into 2021, the total PPG debt service for particularly those with systemic influence on the
the LDCs rose from $19.9 billion in 2020 to $27.3 debt of the LDCs, could help resolve protracted debt
billion in 2021, as all LDCs experienced larger debt situations and prevent further deterioration of LDCs’
costs in 2021 compared to 2020, except for Angola, debt situation. More than half of all LDCs will need
the Comoros, Djibouti, Liberia, Mozambique, and debt relief and support measures that go beyond
Sao Tome and Principe (figure 3.13). Deferred debt preserving the interests of creditors and averting
service through the DSSI varied as a share of total default. Debt restructuring, for example, should
debt service actually paid by LDCs in 2021, ranging contribute to fostering economic growth and poverty
from $0.4 million to $835.8 million. In nominal terms, reduction in the distressed countries, as was the
Angola benefited from the largest deferral in debt case during the implementation of the MDRI in 2005
service among LDCs in 2021, while some other (World Bank, 2022). Potentially, implementation
countries benefited from significant debt deferments of debt standstill provisions under the Group of 20
as a share of the actual PPG debt service paid, such Common Framework may allow multilateral banks
as Zambia (144 per cent), Djibouti (70 per cent), to extend emergency lending and other assistance
while the countries are negotiating debt restructuring.
9
See https://www.worldbank.org/en/programs/debt- When requesting debt restructuring, countries at high
statistics/dssi. risk or in debt distress require quicker debt workouts.

62
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

Table 3.1 that affect international trade (UNCTAD, 2023d).

Implicitly, serial debt restructurings suggest the need
Debt service deferred under the Debt Service Suspension
for structural reforms, particularly for LDCs that
Initiative, 2021
experience deterioration in their trade and capital
Debt service Deferred debt
deferred service as a flows following any significant debt restructuring
through DSSI per cent of PPG (Cheng et al., 2018; UNCTAD, 2023d). Treating
(million of debt service in
dollars) 2021 insolvency problems is necessary but not sufficient,
Afghanistan 4 23 as the recurrence of the debt crisis in the LDCS has
Angola 836 9
shown. The long-term effects of structural factors
Burkina Faso 16 11
have not been adequately addressed by debt relief
initiatives, and the international financial architecture
Burundi 0 2
has long ignored the structural weaknesses of the
Chad 2 1
countries in lending and debt treatment decisions.
Comoros 1 45
It is therefore critical for developed-country partners
Democratic Republic of 35 10
the Congo to treat debt relief as additional to other official flows
Djibouti 30 70
such as ODA, since substituting debt relief for other
Ethiopia 76 4
official flows tends to distort the impacts of ODA in
recipient countries. As much as LDCs in distress
Gambia 3 8
need emergency lending, such debt would only have
Guinea 36 33
a positive impact on economic growth and resilience if
Lesotho 2 1
the resources provided complement other debt relief
Madagascar 3 3
efforts, rather than inflating lending. LDCs need a
Mali 28 10
clear path out of unsustainable debt patterns through
Mauritania 212 53
a series of lifelines such as grants, concessional loans
Mozambique 154 26
and a debt treatment mechanism that is responsive,
Myanmar 76 3
transparent and efficient in resolving unstainable debt
Nepal 51 19 situations.
Niger 21 11
Sao Tome and Principe 1 44
Senegal 69 5
D. Addressing the debt crisis
Sierra Leone 4 8 LDCs at risk of debt distress require an immediate
United Republic of 101 7 injection of liquidity to prevent the crisis from
Tanzania degenerating into a socioeconomic catastrophe in
Togo 20 19 the poorest countries. Conditions dictate that more
Zambia 347 144 grants and concessional finance be mobilized to bring
Source: UNCTAD secretariat calculations, based on World Bank, International
debt to sustainable levels and safeguard the fiscal
Debt Statistics database (accessed May 2023). space the countries desperately need to pursue their
long-term goals. As global efforts intensify to achieve
This could be made possible by other bilateral lenders sustainable consumption and production (Goal 12),
and private lenders committing to terms offered by and accelerate climate action (Goal 13), LDCs have
the majority of the country’s lenders, including the also set ambitious goals through their nationally
participants of the Group of 20 Common Framework determined contributions (NDCs) to meet climate
(Cheng et al., 2018; United Nations, 2023c). In commitments. However, given their diminished
addition, wider reform of the international debt access to concessional financing and grants from
architecture is needed to address the shortcomings multilateral and bilateral official sources, LDCs are
of the international financial system, and to brighten resorting to syndicated loans, bonds and commercial
the prospects for transparent and coordinated debt credit. The result is the evidently unsustainable debt
workouts (UNCTAD, 2023b; United Nations, 2023c). patterns that have disproportionately raised their debt
service costs, and markedly increased the share of
Debt distressed LDCs are likely to remain at risk unless
short-term loans in their debt portfolios.
debt relief efforts are ramped up and the international
financial architecture begins to address core issues Possible responses from multilateral and bilateral
that have contributed to the debt crisis. Those issues partners are discussed in section D.1 below. The
include structural weaknesses of the countries, and proposals are neither exhaustive nor unique to
elements of the polycrisis such as geopolitical tensions the LDCs, but their implementation could address

63
The Least Developed Countries Report 2023

some of the financing gaps in LDCs. In view of the Figure 3.14

structural nature of the debt issues, section D.2 Annual change in public and publicly guaranteed debt stock
reiterates the need for special investment vehicles in and debt service, 2005–2021 (billions of dollars)
the implementation of the Doha Programme of Action. -25 -20 -15 -10 -5 0 5 10 15 20 25 30
2005
1. Multilateral and bilateral response to the 2006
2007
debt crisis 2008
2009
The structural nature of the debt crisis requires a 2010
2011
rethink about the international financial architecture at 2012
the multilateral level to make it more responsive to the 2013
2014
needs of developing countries. Among the proposals 2015
for revamping that architecture are the need to reform 2016
2017
governance in the key players of the international 2018
financial system (i.e. the MDBs), and enhance 2019
coherence through a representative apex body (United 2020
2021
Nations, 2023c). A development-focused approach,
Change in PPG debt stock, billions of dollars Change in PPG debt service, billions of dollars
particularly through a multilateral framework for
sovereign debt workout, could provide an effective, Source: UNCTAD secretariat calculations based on World Bank, International
Debt Statistics database (accessed May 2023).
efficient and equitable mechanism for managing debt
crises while safeguarding the development needs of debt service costs. Moreover, the impact of financing
vulnerable countries like the LDCs (UNCTAD, 2023b). on LDCs’ long-term development goals is either
Economic shocks have deeper socioeconomic negative – because the cost of debt exceeds the social
repercussions for the LDCs than for any other benefits – or subdued as a result of their increased
country groups, and their vulnerability is greater vulnerability to debt distress (United Nations, 2023d).
owing to their inability to mitigate the shocks with In 2011–2021, the average annual growth of LDC’s
their own domestic resources. As the recovery to the PPG debt stocks exceeded $15 billion in seven of
COVID-19 pandemic gathered pace in developed those years, and was higher than $10 billion in 2021
and other developing countries, many LDCs were still and 2015, following major shocks in both cases.
reeling from the crisis (UNCTAD, 2021). Countries in The annual increase in debt service doubled in 2021
distress or those facing a looming debt crisis need compared to 2019, and the trend was generally
timely access to short-term external liquidity to upwards before the pandemic (figure 3.14).
enable them to navigate through the multiple external
Addressing the liquidity crunch
shocks. Lack of access to emergency financing is
one of the reasons for unsustainable debt structures Emergency lending on concessional and affordable
in LDCs, especially during periods of stochastic terms can help the LDCs overcome liquidity
and systemic shocks. Although a debt service constraints. The rollover risk of LDC sovereign
standstill may offer relief, accumulation of arrears debts can be reduced drastically by increasing
could be counterproductive, and may dampen the debt maturities and softening terms to ease the
impact of debt rescheduling. In addition to providing debt pressure. This is particularly relevant for LDCs
short-term liquidity to countries in distress or at risk whose domestic financial position has deteriorated
of debt distress, the structural nature of debt in LDCs since the pandemic, with primary deficits widening
dictates that debt treatment should also contribute as tax revenues have fallen short of government
to addressing long-term structural imbalances by expenditure. An increase in multilateral sovereign
supporting their economic growth and resilience lending should ideally be matched by an increase in
(United Nations, 2023c; UNCTAD, 2023b). other official flows, particularly ODA, and long-term
financing for investments that can enhance growth
Unmet financing needs are accumulating in LDCs as
and the capacity of the LDCs to structurally transform
their access to long-term financing diminishes, with
their economies. Multilateral creditors and other
the global financial system focusing on developed
partners could assist the LDCs by converting
and emerging markets and on short-term and high
maturing short-term loans into long-term loans on
interest rate debt instruments. In this environment,
better terms.
LDCs are paying 5 to 8 times more on new sovereign
debt compared to developed countries’ debt. The Despite its limitations, the Group of 20 Common
increase in LDCs’ debt stocks reflects these inflated Framework has the potential to improve creditor

64
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

coordination and increase prospects for faster debt Table 3.2

resolution. However, lessons from previous umbrella
Share of bilateral public and publicly guaranteed debt held
initiatives point to gaps in achieving comparability of
by partner countries, 2009 and 2021 (percentage)
treatment, eligibility of other developing countries,
predictable time lines, and private sector participation 2009 2021
and that of other stakeholders (UNCTAD, 2023b). China 17.7 40.7
For instance, a large share of LDC debts is owed to Japan 15.0 15.4
countries that are not members of the Paris Club. Russian Federation 6.8 6.8
India 3.5 5.8
China (box 3.3), followed by India, Saudi Arabia,
Saudi Arabia 5.4 4.8
Kuwait, Libya, the Republic of Korea, and the
France 6.0 4.3
Bolivarian Republic of Venezuela were owed 60 per
Multiple lenders 3.2 3.1
cent of the PPG debts of LDCs in 2021, with China’s Republic of Korea 1.1 3.0
share more than doubling in 2009–2021 (table 3.2). Kuwait 5.5 2.5
Cooperation with, and seeking comparable debt relief Venezuela (Bolivarian 0.6 1.6
from, these countries, including maturity extensions, Republic of)
interest rate reductions and debt write-offs, could United States of America 6.3 1.4
ease the economic hardships of the vulnerable LDCs. Libya 1.9 1.1
A wider multilateral approach is needed, especially Italy 3.2 1.1

one that ensures clarity and transparency in the Source: UNCTAD secretariat calculations, based on World Bank, International
lending and debt relief initiatives of the donors. Debt Statistics database (accessed May 2023).

Box 3.3 China, as a major creditor, is critical to debt resolution in the least developed countries: The case of Zambia

According to the World Bank’s International Debt Statistics, China is a major bilateral creditor to LDCs. In 2021, it
held $68 billion, or 41 per cent, of the combined bilateral and commercial bank PPG debt owed by LDCs. In Zambia
in 2021, for example, the PPG bilateral debt stock reached $4.2 billion, 78 per cent of which was from China. China
also held 22 per cent of the $2.3 billion of Zambia’s PPG commercial bank debt. In total, 58 per cent of Zambia’s
bilateral and commercial PPG debt was held by China.
On the margins of the Summit for a New Global Financing Pact in June 2023, Zambia announced that it had reached an
agreement with China and other major creditors to restructure its external PPG debt amounting to $6.3 billion, subject
to further negotiations. The initial agreement with China and France, the co-chairs of its official creditors committee,
sets in motion a process whereby the debtor and creditors define the parameters of the restricted debt. Zambia will
seek to restructure at least $8 billion of its large external debt stock of close to $12.5 billion in PPG debt alone.
The restructuring will be guided by the Group of 20 Common Framework. Zambia’s experience reflects many of the
challenges that LDCs face in dealing with their diverse creditors. Reaching consensus with multiple creditor partners
that have different views on debt treatment, and the role of commercial banks/development banks is very tricky. For
example, the proposals being drawn up by Zambia cover only bilateral debts, although bondholders may also join
the negotiations as their holdings continue to trade at distressed levels. For them, agreeing to a 40 per cent cut in
the net present value of the sovereign bond would be ideal at the present market valuation of less than 50 per cent
(Bloomberg, 2023). Important implications of the restructures revolve around the stock of debt owed to China. Some
of the parameters that will matter include:
• A significant share of the debt owed to China will be treated as commercial debt, including debt owed to the
Industrial and Commercial Bank of China. Only $4.1 billion of debt owed to the Export-Import Bank of China is
categorized as bilateral debt (Reuters, 2023).
• Commercial partners may push for shorter maturities at higher interest rates (Bloomberg.com, 2023). The
negotiations should seek equal treatment from private lenders, in line with the Group of 20 Common Framework,
as well as better terms. An ideal situation would be to lower interest rates to below 1 per cent, cap interest rates
on new debt, and extend maturity on restructured debt to over 20 years.
The success of the Group of 20 Common Framework and other multilateral approaches to debt treatment will
depend on fundamental changes to that framework. The presence of China and other systemically important lenders
to the LDCs would be critical in such discussions.
While Chinese lending is often criticized for its complexity, confidentiality, and other strict terms (Gelpern et al., 2022),
the case of Zambia shows that China is willing to take part in multilateral debt resolutions. This, and other cases
where China is involved, will provide valuable lessons for multilateral debt resolution. In addition, it will provide
important lessons for LDCs in managing their external debt, including in the design of contracts, management of
risks and negotiations on debt restructurings.

65
The Least Developed Countries Report 2023

Implementing measures that align with the structural LDCs. The facilities are also notoriously underfunded
characteristics of least developed countries’ debts as they rely on donor pledges to keep interest free
loans flowing to the poorest countries. Early and
Although the IMF provides emergency lending to
deep restructuring of debt should be extended in a
LDCs through facilities such as the Rapid Credit
coordinated manner to all LDCs in debt distress or at
Facility (RCF) which is open to all countries eligible
high risk of debt distress.
for the Poverty Reduction Growth Trust (PRGT) fund,
some conditionalities attached to the funds may be A debt reduction initiative that has received renewed
restrictive amidst the rising debt vulnerabilities of the attention recently is the debt-for-nature swap (box 3.4).

Box 3.4 What are debt-for-nature swaps?

Debt-for-nature swaps may provide the much-needed financial resources to invest in some initiatives that could
help mitigate the effects of climate change. They offer a promising mechanism for LDCs to address some
environment-related challenges for limited types of projects. Under these arrangements, resources which normally
would be spent to service debt may be provided to a country to support climate-friendly initiatives while alleviating
its debt burden (Georgieva et al., 2022). Depending on their designs, such swaps can improve budgetary alignment
with environment/climate objectives and foster green transformation. The swaps may also improve the impact
of debt relief, provided the resulting resource reallocation does not reduce ODA and the recipient country’s fiscal
allocations to other development priorities. Specifically, debt-for-nature swap contracts do not unlock new resources;
rather, they redirect debt obligations to a project that could have been covered by the creditor (Sheik, 2018;
Chamon et al., 2022). The latter may prove challenging for countries in debt distress that also face primary deficits.
One of the risks posed by debt-for-nature swaps is that it may simply involve the reallocation of resources from
other environmental areas in the beneficiary country, and thus they may not provide any additional net benefit to
environmental conservation. Indeed, the reallocation may result in a misalignment of priorities.
Moreover, debt-for-nature swaps may only provide short-term financing that is insufficient to address the long-term
investments needed for a recipient country to adapt adequately to climate change. The interlinked nature of climate
projects may also oblige the beneficiary government to channel additional resources for environmental purposes
over and above the equivalent “forgiven” debt. This is usually the case for environmental projects spread over
longer periods compared to the life of the forgiven loan. The context of the LDCs is challenging because their fiscal
positions in 2019–2023 deteriorated as domestic debt exceeded revenue in 22 of 42 LDCs for which data were
available. A total of 17 of the 22 were running primary deficits, implying that current government programmes cost
more than could be covered by the tax revenues they were collecting (figure 3.11). Fifteen of these countries also had
historical payments that were higher, as net interest payments absorbed a larger share of government expenditure.
In the current environment, debt-for-nature swaps may only become relevant if the terms are not complex, and if the
cost implications for beneficiary countries are minimized.
In 2003, the Government of Germany extended debt relief to Madagascar, whereby debt amounting to 23.3 million
euros was cancelled in exchange for the Government of Madagascar’s allocation of funding equivalent to 13.8 million
euros in counterpart funds over a 20-year period through a proposed Madagascar Foundation for Protected Areas
and Biodiversity. The Government made an initial capital contribution of 1.7 million euros, and a further 425,000 euros
were to be paid in annual instalments up to 2023 (Moye and Paddack, 2003). The commitment was in euros, and
under the agreement, the Government also committed to set up the Foundation. In this example, the debt-for-nature
swap contributed not only to reducing Madagascar’s debt and protecting the environment, but also strengthened the
capacity of the country’s institutions and ability to mobilize resources for the environment.
The following are a few more recent examples of debt-for-nature initiatives involving bilateral arrangements:
• France, along with the World Wide Fund for Nature (WWF) entered into a swap arrangement with Madagascar
in exchange for $20 million in conservation funds in 2008.
• France entered a swap agreement with Mozambique to pardon a 17.5 million euro debt in exchange for 2 million
euros in conservation funds in 2015, 10 million euros in budget support, and 5.5 million euros for vocational
training (Club of Mozambique, 2016).
• France, through its development agency (Agence française de développement), allocated 315 million euros
in 2016 under the Debt Reduction-Development Contract (Contrat de Désendettement et de Développement,
C2D) initiative. Under the initiative, amounts that are due as debt service are transferred to the country in the form
of a grants to finance poverty reduction programs. LDCs eligible for C2Ds include the following LDCs that are
also HIPCs: Burundi, the Democratic Republic of the Congo, Guinea, Liberia, Madagascar, Malawi, Mauritania,
Mozambique, Myanmar, Rwanda, Sierra Leone, Somalia, the Sudan, Uganda and United Republic of Tanzania.
The initiative is both a debt cancellation and a swap in the sense that the beneficiary countries are still obliged
to repay the maturities on the uncancelled portion of its debt, which then is transferred in the form of grants to
earmarked programs selected by mutual agreement with the partner countries (AFD, 2016)

66
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

This instrument may operate in the same manner as The debt crisis in the LDCs is developing at several
a simple bilateral debt swap, but with a conditionality levels and worsened by the increasing frequency
attached relating to the environment or nature. of trade shocks and widening trade gaps. Export
Thus, the debtor country must commit to spend on volatility exert pressure on government revenue
a specific climate action the equivalent of the debt and are a major source of balance of payments
service due to the bilateral creditor, and in return imbalances in commodity dependent economies.
the indebted country’s debts are restructured or LDCs in debt distress and at risk of distress need a
reduced accordingly. The limited availability of climate clear path out of unsustainable debt patterns through
finance targeting investments in adaptation in the a series of lifelines, such as grants, concessional loans
LDCs makes the initiatives attractive, especially if it and a debt treatment mechanism that is responsive,
can unlock climate finance for adaptation while also transparent and efficient in resolving unstainable
addressing the debt burden. However, examples debt situations. Debt and liquidity management
of successfully completed debt-for-nature swap in the LDCs should be responsive to the different
programmes show that the resources involved are circumstances of the countries — particularly those
small, and therefore not desirable for countries with that are facing long-term, structural imbalances, and
large investment needs for adaptation or for countries liquidity constraints. Left to the dictates of lenders,
that face imminent fiscal/liquidity risks, as the process the conditionalities imposed can often erode LDCs’
of implementing the swaps is long, and sometimes policy space and weaken government control over
costly for both bilateral partners to the swap (Hebbale their monetary and fiscal policies. It is also critical for
and Urpelainen, 2023; Georgieva et al., 2022). developed-country partners not to substitute debt
relief for official development flows, including ODA.
Similarly, emergency lending during crises should be
E. Conclusions sparingly used as a complement to debt relief efforts
This chapter examined the debt vulnerabilities of rather than as an opportunity to inflate debt stocks of
LDCs in order to understand factors that led to the MDBs. In the present circumstances, there are a
their recurring debt crises and proposed policy number of initiatives that could help alleviate the debt
recommendations that, if implemented, could burden of LDCs. For instance, some LDCs could
contribute to achieving Sustainable Development benefit from a temporary debt standstill arrangement
Goal 17.4. LDCs are in a prolonged debt crisis, and to postpone payments during the transition period
while debt levels have increased among all country of debt restructuring. In addition, progress should
groups since the 2008–2009 global financial crisis, be made in establishing debt workout mechanisms
the aftermath of that crisis marked a critical phase at the multilateral level to enable countries to resolve
for LDCs as debt trends reverted to pre-HIPC levels debt situations without recourse to legal processes
prior to the COVID-19 pandemic. The COVID-19 that may not respond appropriately to sovereign
pandemic played a major role in worsening the financing requirements.
debt situation of LDCs, particularly those suffering
Addressing long-standing structural economic
from chronic current account deficits, and widening
weaknesses could avert their procyclical debt
domestic resource gaps.
vulnerabilities. However, there is also a need for a
It is evident that structural factors are at the centre commensurate international response to the debt
of the high debt accumulation and recurring debt crisis by addressing systemic issues that affect the
crises in LDCs. First, the buildup in the external debt debt sustainability of the LDCs. Such a response
is linked to their weak economies that are trapped should include changes to the international financing
in low growth patterns. Second, their undiversified architecture and to conditionalities imposed by MDBs,
economies are both a consequence and a cause of as well as greater transparency in bilateral financing
commodity dependence on primary exports that are arrangements and debt treatment mechanisms.
continuously losing share in world trade. Third, a shift Granting all LDCs access to IDA loans and increasing
in the debt structure of LDCs has been underway since international financing assistance mainly in the form of
the end of the global financial crisis and subsequent grants would ease the financing pressure and foster
changes to the ODA architecture. A substantive share conditions for balancing debt portfolios between
of private credit with shorter maturities characterizes long-term and short-term debts. Moreover, different
the debt structure of LDCs. However, the debt categories of creditors would help spread interest rate
structure remains predominantly multilateral, although risks and dampen the effect of speculative investors,
the decline in the share of multilateral debt has been particularly in the prevailing global economic climate
quite drastic for some countries. of high interest rates and inflationary pressures.

67
The Least Developed Countries Report 2023

Annex
Figure A3.1
Public and publicly guaranteed debt stock and exports, selected countries, 2006–2021 (billions of dollars)

Angola Bangladesh
80 70
70
60
60
50
50
40 40
30 30
20 20
10 10
0 0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
PPG debt stock Exports of goods and services PPG debt stock Exports of goods and services

Benin Burkina Faso

7 7
6 6
5 5
4 4
3 3
2 2
1 1
0 0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

PPG debt stock Exports of goods and services PPG debt stock Exports of goods and services

Cambodia Chad
25 6
5
20
4
15
3
10 2
5 1
0 0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

PPG debt stock Exports of goods and services PPG debt stock Exports of goods and services

Source: UNCTAD secretariat calculations, based on UNCTADStat and World Bank, International Debt Statistics database (accessed March 2023).

68
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

Figure A3.2
Public and publicly guaranteed debt stock and merchandise exports, selected countries, 2006–2021 (billions of dollars)

Bhutan Comoros
3 0.3
2.5 0.25
2 0.2
1.5 0.15
1 0.1
0.5 0.05
0
0

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
PPG debt stock Exports of goods and services PPG debt stock Exports of goods and services

Ethiopia Haiti
35 2.5
30
2
25
20 1.5
15 1
10
0.5
5
0 0 2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

PPG debt stock Exports of goods and services PPG debt stock Exports of goods and services

Malawi Mozambique
2.5 12

2 10
8
1.5
6
1
4
0.5 2
0 0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

PPG debt stock Exports of goods and services PPG debt stock Exports of goods and services

Source: UNCTAD secretariat calculations, based on UNCTADStat and World Bank, International Debt Statistics database (accessed March 2023).

69
The Least Developed Countries Report 2023

Figure A3.3
Public and publicly guaranteed debt stock and merchandise exports, selected countries, 2006–2021 (billions of dollars)

Liberia Madagascar
3
4
3,5
2,5 3
2 2,5
1,5 2
1,5
1
1
0,5 0,5
0 0

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
PPG debt stock Exports of goods and services PPG debt stock Exports of goods and services

Mali Mauritania
6 4,5
5 4
3,5
4 3
3 2,5
2
2 1,5
1 1
0,5
0 0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
PPG debt stock Exports of goods and services PPG debt stock Exports of goods and services

Myanmar Sierra Leone

20 2,5
18
16 2
14
12 1,5
10
8 1
6
4 0,5
2
0 0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
PPG debt stock Exports of goods and services
PPG debt stock Exports of goods and services 2021

Yemen Zambia
12 14
10 12
8 10
6 8
6
4
4
2
2
0 0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

PPG debt stock Exports of goods and services PPG debt stock Exports of goods and services

Source: UNCTAD secretariat calculations, based on UNCTADStat and World Bank, International Debt Statistics database (accessed March 2023).

70
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

Figure A3.4
Public and publicly guaranteed debt stock and merchandise exports, selected countries, 2006–2021 (billions of dollars)

Nepal Niger
9 5
8 4,5
7 4
3,5
6 3
5 2,5
4 2
3 1,5
2 1
1 0,5
0 0

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
PPG debt stock Exports of goods and services PPG debt stock Exports of goods and services

Rwanda Sao Tome and Principe

6 0,35
5 0,30
0,25
4
0,20
3 0,15
2 0,10
1 0,05
0 0 2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

PPG debt stock Exports of goods and services

PPG debt stock Exports of goods and services

United Republic of Tanzania

Uganda
20
14 18
12 16
14
10 12
8 10
8
6 6
4 4
2
2 0
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

PPG debt stock Exports of goods and services

PPG debt stock Exports of goods and services

Source: UNCTAD secretariat calculations, based on UNCTADStat and World Bank, International Debt Statistics database (accessed March 2023).

71
The Least Developed Countries Report 2023

Figure A3.5
Public and publicly guaranteed debt stock and merchandise exports, selected countries, 2006–2021 (billions of dollars)

Cambodia Democratic Republic of the Congo

25 25
20 20
15 15
10 10
5 5
0 0

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2006
2007

2021
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
PPG debt stock Exports of goods and services PPG debt stock Exports of goods and services

Djibouti Gambia
6 0,9
0,8
5 0,7
4 0,6
0,5
3 0,4
2 0,3
0,2
1 0,1
0 0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2015
2016
2017
2018
2019
2020
2021
2006
2007
2008
2009
2010
2011
2012
2013
2014

PPG debt stock Exports of goods and services PPG debt stock Exports of goods and services

Lesotho Solomon Islands

1,4 0,8
0,7
1,2
0,6
1 0,5
0,8 0,4
0,6 0,3
0,4 0,2
0,2 0,1
0
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2013
2014
2015
2016
2017
2018
2019
2020
2021
2006
2007
2008
2009
2010
2011
2012

PPG debt stock Exports of goods and services

PPG debt stock Exports of goods and services

Source: UNCTAD secretariat calculations, based on UNCTADStat and World Bank, International Debt Statistics database (accessed March 2023)

Figure A3.6
Public and publicly guaranteed debt stock and merchandise exports, selected countries, 2006–2021 (billions of dollars)

Timor-Leste Togo
2,5

1,5

0,5

0
2021
2018

2020

2016
2017
2018
2019
2020
2021
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

2019

2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

PPG debt stock Exports of goods and services PPG debt stock Exports of goods and services

Source: UNCTAD secretariat calculations, based on UNCTADStat and World Bank, International Debt Statistics database (accessed March 2023)

72
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

Table A3.1
Public and publicly guaranteed debt stock as a percentage of gross domestic product

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Afghanistan 13 20 19 17 13 11 10 10 10 10 11 10 11 10 10 13
Angola 14 14 14 20 19 17 17 20 24 39 84 62 62 69 88 69
Bangladesh 26 24 22 21 18 17 18 17 15 14 11 12 13 13 15 15
Benin 9 9 9 10 12 11 12 13 13 17 17 20 23 25 28 34
Bhutan 80 66 55 63 59 59 76 86 96 97 103 104 102 103 128 118
Burkina Faso 15 17 16 18 19 17 18 17 17 20 20 20 19 21 22 22
Burundi 97 94 77 22 19 16 18 16 15 13 15 15 16 18 20 20
Cambodia 41 26 25 26 27 27 31 32 31 31 29 30 28 28 34 35
Central African 60 51 42 15 18 12 12 19 21 25 23 19 19 19 18 17
Republic
Chad 22 20 17 19 19 18 18 22 26 24 26 28 25 25 28 25
Comoros 37 35 29 29 27 24 22 10 10 10 15 15 19 19 21 21
Democratic
Republic of the 68 65 59 64 26 20 18 18 16 15 15 15 12 12 13 12
Congo
Djibouti 57 77 68 70 54 52 47 33 37 48 62 70 70 69 74 69
Eritrea 65 65 69 55 63 49
Ethiopia 14 13 10 15 22 25 23 25 29 30 30 31 32 29 27 25
Gambia 63 51 23 28 27 31 31 34 37 35 31 39 37 39 43 40
Guinea 70 49 43 45 43 44 13 16 17 18 21 18 17 17 24 22
Guinea-Bissau 154 135 109 116 115 21 23 23 26 30 28 32 34 41 57 58
Haiti 18 16 18 10 7 5 7 9 12 13 14 13 12 14 14 10
Lao People’s
Democratic 74 69 59 59 53 49 44 43 42 46 46 49 52 54 56 55
Republic
Lesotho 34 38 38 40 32 28 31 33 32 33 37 36 32 35 42 39
Liberia 108 75 50 38 9 8 7 7 9 13 15 19 21 25 31 29
Madagascar 20 17 17 20 20 19 19 19 19 22 21 21 21 22 27 26
Malawi 19 17 14 14 10 12 17 23 23 23 28 20 19 18 18 19
Mali 22 22 20 19 21 19 22 24 22 26 25 25 24 26 29 28
Mauritania 34 33 32 42 41 38 45 45 50 60 60 59 53 50 50 40
Mozambique 23 24 23 29 31 30 31 46 51 59 81 79 72 70 77 67
Myanmar 56 45 34 27 22 17 17 16 15 15 16 17 15 16 16 18
Nepal 36 34 28 28 22 16 16 16 15 15 15 15 15 17 21 21
Niger 14 13 11 13 15 22 16 17 16 20 22 24 22 25 29 29
Rwanda 12 14 13 13 12 14 14 20 21 24 27 31 34 38 50 50
Sao Tome and 232 96 58 67 74 81 68 62 58 69 65 65 55 53 51 45
Principe
Senegal 14 14 14 18 20 20 24 24 25 30 32 40 48 52 57 52
Sierra Leone 77 22 22 25 26 25 22 18 18 23 27 28 26 29 31 32
Solomon Islands 24 21 18 16 14 11 9 8 7 6 6 7 6 6 8 9
Somalia 41 36 33 32 32 36 32 38 39
Sudan 27 22 21 24 20 19 25 25 21 19 15 12 49 51 62 45
Timor-Leste 1 2 3 4 7 9 9 10 6
Togo 65 62 44 44 29 9 12 14 15 20 16 18 17 19 23 21
Uganda 11 13 12 9 10 11 13 14 13 15 19 22 23 24 30 30
United Republic of 13 15 13 16 18 19 20 22 23 26 26 27 27 28 28 28
Tanzania
Yemen 27 26 21 23 19 18 20 17 16 15 20 24 29
Zambia 7 7 6 7 6 8 12 12 18 31 34 34 38 47 68 56
LDCs (average) 41 34 28 27 25 21 20 21 22 25 28 28 29 30 34 32

Source: UNCTAD secretariat calculations, based on UNCTADStat and World Bank, International Debt Statistics database (accessed March 2023).

73
The Least Developed Countries Report 2023

Table A3.2
Tax revenue and claims on central government, 2011–2015 and 2016–2020 (percentage)

Claims on central Claims on central

Claims on central government as Claims on central government as
Tax revenue Tax revenue
government a percentage of government per cent of broad
(percentage of (percentage of
Country (percentage of of broad money, (percentage of money, average
GDP) GDP)
GDP) average annual GDP) annual growth
growth rate rate

2011–2015 2016–2020
Afghanistan 7.6 -5.9 -0.7 9.7 -7.5 -3.2
Angola 13.9 -3.1 1.5 9.7 11.1 14.3
Bangladesh 8.8 14.8 3.5 7.3 13.6 4.3
Benin -2.3 0.5 0.6 1.7
Bhutan 14.1 2 0.3 14.2 3.4 0.3
Burkina Faso 13.6 -0.5 0.7 14.7 0.8 0.9
Burundi 8.9 9.4 25.1 17.4
Cambodia 12.5 -6.4 -2.8 17.1 -17.4 -4.4
Central African Republic 6.3 16.1 5.3 7.9 16.8 4.2
Chad 2.2 5.6 11.9 8.7
Comoros 0.9 -2.2 2.1 2.5
Democratic Republic 2 13.4 2.6 5.4
of the Congo
Djibouti 1.6 0 0.8 0.4
Eritrea 99.9 5.3
Ethiopia 8.9 7.2
Gambia 20 13.2 29 8.7
Guinea 13.5 2.6 13.8 9
Guinea-Bissau 6.8 7.5 9.9 8.5 -2.7
Haiti 1.2 2.6 6.9 7.5
Kiribati 18.9 24.3
Lao People’s Democratic
Republic
Lesotho 34.9 -16.4 -4.1 28.9 -5.1 5.6
Liberia 12.2 6.5 -0.1 8.8 11.9
Madagascar 8.7 3.8 6.4 9.9 5.4 2.7
Malawi 14.9 7.2 4 12.7 8.9 26
Mali 13.1 -1 3 14.3 4.1 5.2
Mauritania 7.9 -1.1 6.9 -0.9
Mozambique 20.5 -0.4 3.2 22.5 5.2 2.2
Myanmar 5.8 13.3 -0.9 5.9 19.9 8
Nepal 13.1 8 0.6 17.8 7.4 2.1
Niger -0.8 -0.9 2 2.8
Rwanda 13.1 -4.5 -2.4 14.4 -2.8 -1.9
Sao Tome and Principe -3.1 -2.8 -1.6 1.6
Senegal 15.8 1.2 -0.4 16.2 5 4.8
Sierra Leone 8.2 8.9 17.2 17.7
Solomon Islands 25.9 -12.1 -8.8 23.5 -8.2 1
Somalia 0
South Sudan 11.2 62.2 43.2 102.1
Sudan 6.9 10.8 15.5 7.4 11.7 28.7
Timor-Leste 95.2 -38.9 -9.4 20.8 -31 -9.6
Togo 17.2 3.9 -0.3 13.2 2.4 -0.3
Tuvalu
Uganda 10.8 3.6 1.9 11.6 9.2 5
United Republic of 10.6 3.8 5.5 11.6 3.4 0.5
Tanzania
Yemen 18.6 14.8
Zambia 14.8 8.2 3.6 15.6 17.7 16.8
LDCs (average) 17.5 4.5 3.6 14.2 6.3 7.5

Source: UNCTAD secretariat calculations, based on UNCTADStat and World Bank, International Debt Statistics database (accessed March 2023).

74
 CHAPTER 3: Addressing debt vulnerabilities of the LDCs

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