By Paul Akiwumi, Director, Division for Africa, LDCs and Special Programmes, UNCTAD
According to recent UNCTAD analysis, most LDCs will likely take several years to recover the level of GDP per capita they had in 2019, and compared to developed countries, which may experience a short V-shaped recovery, the median LDC would take roughly three years to climb back to pre-COVID-19 levels of output per capita. Moreover, extreme poverty in LDCs is projected to rise to 35%, equivalent to 32 million people, due to the pandemic.
Confronted with looming fiscal distress, LDCs will need further long-term support to recover and address the structural economic challenges they face. Beyond the recovery, for LDCs to achieve inclusive development, global action should be geared towards supporting LDCs build their underdeveloped production systems.
Looming fiscal distress
For many LDCs, COVID-19 has precipitated a fiscal crisis. Rising health-care expenditures, slowing trade and support programmes to smooth consumption have increased already high debt levels in these countries.
Before the onset of the COVID-19 crisis, five LDCs were already in debt distress and 13 more were at high risk of debt distress. Most of these LDCs had received debt relief only 10 to 15 years earlier, under the Heavily Indebted Poor Countries Initiative or the Multilateral Debt Relief Initiative.Continue reading