To achieve the Sustainable Development Goals, least-developed countries (LDCs) need to spend an additional $372 per person yearly, the United Nations Conference on Trade and Development (UNCTAD) said in its biannual report. As LDCs are faced with skyrocketing debt burdens, increasing public spending for the implementation of the UN 2030 Sustainable Development Goals (SDGs), including SDG 13 on climate change. becomes increasingly difficult.
Currently, there are 46 countries classified by the UN as an LDC, 33 of which are in Africa, nine in Asia, one in the Caribbean (Haiti), and three in the Pacific (Kiribati, Solomon Islands, and Tuvalu).
Crippling debt burden
In 2021, the LDCs debt service soared to $27 billion, up by 37% compared to 2020, according to the report. The escalating service debt burden prevents LDC governments from directing spending towards the implementation of the UN 2030 SDGs, which require high investments.
To secure social protection and decent jobs alone, the LDCs would have to allocate 45% of their GDP. Yet, these two sectors are not the only matters of concern for them. According to the UN report, 17 out of 20 of the countries most vulnerable to climate change are LDCs.
As such, the UNCTAD is calling on bilateral donors to meet their existing commitments as well as to increase development assistance to LDCs so that they can meet their SDG targets by 2030. Furthermore, donors are also being asked to set up separate goals for climate finance for LDCs.
“Time is running out for LDCs to achieve the SDGs,” said Rebeca Grynspan, the UNCTAD Secretary-General.
Financial reform and honoring commitments
The two main thrusts of the 2023 Least Developed Countries (LDCs) report were that LDCs are in urgent need of funding (separate from Official Development Assistance) to combat climate change and that the international financial system urgently needs to be overhauled and reformulated.
In this respect, the UNCTAD highlighted that “the international financial system has the capacity to respond to the challenge of providing development and climate finance to LDCs, provided it adequately takes account of the specific needs and conditions of these countries”. It called on the international community to allocate “significantly higher volumes of grants and low-cost loans to LDCs under highly concessional conditions” in order to ease the already unsustainable levels of debt shouldered by LDCs.
Furthermore, the 2023 LDC report takes to task the failure of donor nations to meet their funding pledges made in connection with the 2030 Agenda (SDGs), the Doha Program of Action, and the United Nations Framework Convention of Climate Change, none of which have been fully funded.
According to the Secretary-General of UNCTAD, LDCs are a “litmus test” for the success or failure of the SDGs and if the global financial system is not comprehensively restructured, then LDCs will be “unlikely” to achieve their SDGs by the year 2030.
A bleak outlook
While there is no disputing that the current situation in Least Developed Countries (LDCs) is dire, the future outlook, as portrayed in the 2023 LDCs report, is quite bleak as well. Just two years ago, the UNCTAD LDCs report estimated that $462 billion would need to be annually invested in LDCs in order for those countries to meet their development goals, a 55% increase from 2019. Today, two years later, the UNCTAD estimate has risen to more than $1 billion a year, an astonishing 127% increase.
As if that were not bad enough, the amount of Official Development Assistance (ODA) from donor countries has decreased in recent years, partly because some of the biggest donors have diverted ODA funds toward in-country refugee assistance and hosting which deliver zero direct financial or economic benefits to LDCs. Indeed, ODA spend on the 46 LDCs has dropped to $67 billion in 2021, down from $73 billion in 2020, and ODA spend from OECD-DAC donors amounts to just 0.09% of their annual gross national income (GNI), far short of the 0.15-0.2% of GNI level as stipulated in SDG 17 and the Doha Program of Action.
Last, but certainly not least, the foreign debt levels of LDCs has risen tremendously over recent years, reaching a combined total of $570 billion in 2022, far outstripping the LDCs’ collective GDPs. Also, all indicators of external debt sustainability have worsened as the ratio of total debt service to exports of goods rose to 18.9% in 2022 compared to 18.3% in 2021 while the share of LDC government revenue spent on servicing debt rose to 17% in 2022, compared to 15.6% in 2021.
Although a handful of countries are believed to be ready to “graduate” from Least Developed Country (LDC) status during the next UNCTAD review, the stark reality is that the majority of LDCs are making poor progress on climate change, economic development, or meeting the basic needs of their citizens, primarily as the result of insufficient funding from donors, inadequate access to affordable private capital from international sources, and a crippling foreign debt burden that grows every year. Short of a miraculous turn of events, it is highly unlikely that LDCs will meet any of their Strategic Development Goals (SDGs), including climate change, by the year 2030.
Founded in 1964, the UNCTAD updates its list and definition of Least Developed Countries (LDCs) every three years. Currently, an LDC must have an average gross national income per capita of $1,088 or below as well as a low rate of stunting (childhood malnutrition), maternal mortality, and infant mortality, plus low levels of adult literacy and secondary school completion. Since the UN first began classifying countries by development levels in 1971, only six countries have “graduated” from LDC status.