Debt Sustainability at the Times of Crisis - The Least Developed Countries' Perspective
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| Year of publication | 2009 |
| Type | Conference abstract |
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| Description | The current global financial and economic crisis has highlighted the importance of a responsible debt management in a situation when a relatively favorable situation of the least developed countries indebtedness is looming to come to a halt. The last few years saw intensive debt restructuring and debt relief operations being carried out which, together with favorable macroeconomic and external factors, resulted in improvement in debt ratios of many poor countries. The current global crisis now threatens to jeopardy these gains. More stringent conditions on international lending, recession in developed countries and a decline in their aggregate demand mean that the indebted least developed countries will have a harder time servicing their debts. Ultimately, many of the variables influencing poor countries debt are rooted in the developed world and beyond the control of affected countries. However, it is a task for debt management and debt sustainability analysis in the least developed countries to formulate ways to mitigate the impact the global economic crisis. This paper aims to assess the sustainability of the current debt situation of the heavily indebted poor countries and identify factors that are most likely to contribute to the deterioration of debt indicators. Based on data analysis, we find that sovereign debt of countries involved in HIPC Initiative is in a relatively strong position to weather the impact of the global crisis. While the main negative external factors are the recession in developed countries and decline of commodity prices which have a negative effect on their export earnings, the true extent of debt problems which are likely to occur depend to a large extent on whether appropriate debt management measures were adopted in the pre-crisis times, which is often not the case. |
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