Creating a fairer economic landscape for LDCs

July 27 2021: The draft Programme of Action begins with a call to “realize our collective ambitions of building back better from COVID-19”, (Para 3). However, as Rabab Fatima, Permanent Representative of Bangladesh has described it: “We are in the midst of an unprecedented crisis. … The LDCs are bearing their heaviest brunt. They have weak infrastructures, and a serious lack of capacity to cope with internal and external shocks”.

The current economic landscape in which LDCs operate has been drawn up by the more powerful nations and is skewed in their favour.

Least Developed Countries are still marginalized from the decision-making processes including those pertaining to global trade and finance.” Sophia Tesfamariam Yohannes, Permanent Eritrean Representative to the UN.

A lost decade for LDCs?

It is estimated that most LDCs will take at least three years to recover to 2019 levels of GPD per capita, while the poorest like Burundi, Haiti and Somalia will take more than five years to recover. The 2020 Least Developed Countries Report, produced by UNCTAD, says that 43 are likely to experience a fall in average incomes, and forecasts that the pandemic could push LDCs to their worst economic performance in 30 years.

The poverty rate (in LDCs) will rise from 32.5% to 35.7% in 2020 due to the Covid-19-induced economic crisis” (UNCTAD)

With falling revenues, and a spiralling debt burden, there has been a devastating socio-economic fallout in LDCs. Changes are needed in the economic landscape to help reverse this trend and support economic renewal; these include debt cancellation, a fairer global tax system, and increased ODA.

The first economic priority: Debt Cancellation

These countries are struggling to service their debts and have to make a painful choice at the expense of investment in health, education, and social protection”, is how Collen Vixen Kelapile, Permanent Representative of Botswana and ECOSOC Vice President has described it.

In April 2020 in light of the growing pandemic, the G20 launched the Debt Service Suspension Initiative (DSSI), making 73 countries (including LDCs) eligible for a temporary suspension of debt-service payments to their bilateral creditors – now extended until the end of 2021.


The G20 ́s “DSSI” in practice just means kicking the can down the road. Many LDCs require actual debt cancellation”. Bodo Ellmers of Global Policy Forum.
However, as the UN’s Committee for Policy Development points out “Merely suspending debt servicing constitutes a procrastination measure rather than effective development financing, as in 2020 many LDCs spent more on debt servicing than on health”. It also does not include private creditors, which are owed $311 billion of the total of $598 billion.
There is considerable difference in debt relief, ‘forgiveness’, or support and debt cancellation. As the Asian People’s Movement on Debt and Development (APMDD) points out, even with these new initiatives, debt service payments in 2021 amount to nearly $1.1 trillion, which could vaccinate 2 billion people through COVAX, a better way of “building back better”.
More than 200 international NGOs have called on multilateral institutions, including the IMF and World Bank, to offer an immediate cancellation of all principal interest and charges for all countries, and for indebted governments to cancel payments to private external lenders.
The second economic priority: A Fairer Global Taxation System
Taxing revenue helps a country garner resources to build up its services and support its citizens. To avoid paying tax, multinational corporations move their assets daily across the global. As a result, every year a minimum of $425 billion in tax revenue is lost.

“The Mbeki panel has abundantly demonstrated how more money flows out of LDCs through illegal financial transfers, most of it by multinational corporations, than what flows in via ODA… Roberto Bissio, Coordinator of SocialWatch.

In a related move by global corporations, in the early 1990s they convinced governments that if they taxed them less, they would invest more. This set up a competition between countries to offer the lowest tax rates to entice corporations to invest. Only they benefitted – countries didn’t. In a partial move to stop this, this July the G7 suggested a global minimum corporate tax rate of 15%, which it heralded as ending a ‘race to the bottom’ to stop nations undercutting each other’s tax rates.
However, it benefits rich countries in the North most, as there is relatively little direct investment into LDCs. Secondly, the 15% rate only applies to firms that have profit margins above 10%, whereas corporations like Amazon do not. This new measure will never prevent them moving their assets around the world, nor give LDCs their rightful tax revenue needed to support development.
The third economic priority: Increased Overseas Development Assistance
LDCs need more financial support in the form of grants to help them out of the current abyss. ODA is an important support measure by developed economies but has stalled over the years and the pandemic has resulted in cuts to development support. Just recently one donor: the UK, nearly halved its previous commitment to pay 0.7% of GDP for ODA so it is important that development partners stick to their pledge of 0.7% of GDP
These partners should also stop changing the method they use for accounting how much they pay in ODA which inflates the figures without adding any extra monies. This is also the moment to increase grants to LDCs to help them over the current abyss.

ODA providers should meet the financing gap over the access to Covid-19 tools”. Volkan Bozkir. President of the UN General Assembly

In the light of this trend, NGOs are urging donors to stand by their commitments to development support. Tanya Cox, Director of CONCORD (representing EU NGOS), said “It’s crucial that the EU prioritises grant-based finance in its plans to achieve the target for ODA/GNI to LDCs”.
We need more aid. This is not charity, but justice. ODA matters to LDCs making up a full 1/4 of the external finance”, Gabriela Bucher of Oxfam International.
LDC Watch, the umbrella group for NGOs in LDCs, is pressing for a substantial increase in the flows of official development assistance (ODA) which it has characterised as “tended to stagnate or decline over time”.
The Programme of Action should include three clear actions:
Debt cancellation – not suspension, nor ‘forgiveness’ but full cancellation of bilateral, multilateral and private debt.
Close tax loopholes to prevent individual corporations moving their assets around the world, declaring their profits where they payless- or non- taxes, instead of where they are generated. This will help LDCs get their rightful taxes.
Urge development partners to stick to their pledge of 0.7% of GDP for ODA, stop inflating ODA figures with accounting tricks and increase grants to LDCs to help them over the current abyss.

Author of paper: Daphne Davies, Editor LDC News:


To discuss the issues raised in this paper, please contact Roberto Bissio, Coordinator, Social Watch:, WhatsApp/Tel: +33 6 1279 4750.


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