The covid-19 pandemic has generated severe health, economic and debt crises for the least developed countries (LDCs). On the one hand, they cannot mobilise sufficient financial resources on their own to cope with the effects of the pandemic because their public revenues are too low and external finance is not always available. On the other hand, many LDCs have been highly indebted, even prior to the crisis. Of the 45 LDCs covered by the Debt Sustainability Framework of the World Bank and International Monetary Fund, five were in debt distress and thirteen more were classified at high risk of debt distress. In this context, the G20 members hold a strong responsibility to support and identify innovative mechanisms to mobilise financial resources for the LDCs. The G20 could play a key role in bringing forward a more effective architecture for development finance: blended finance, special drawing rights reallocation and sustainable bonds.
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This publication first appeared on the IAI site.
Authors: Kathrin Berensmann, DIE.
The views are those of the authors and not necessarily those of ETTG.