Countries at very low levels of development

LDCs

The UN describes LDCs as:
- "the poorest and most economically weak of the developing countries, with formidable economic, institutional and human resource problems, which are often compounded by geographical handicaps and natural and man made disasters".

•In order to graduate from the list a country must meet the threshold for 2 of the 3 criteria in 2 consecutive triennial reviews

•As well as extreme poverty many LDCs also suffer from some of the following:

-On-going and widespread conflict (civil war, ethnic conflict)
-Extensive political corruption
-A lack of political and social stability
-A form of government that is authoritarian in nature


Issues in the worlds LDCs:

•Quality of life

-People in LDCs in poverty
-A large proportion has an income too small to meet their basic needs
-Even if the resources within a country were evenly distributed there is not enough to sustainably provide for the population.
-The World Bank defined new international poverty line as $1.25 a day for 2005 (equivalent to $1 a day in 1996)
-In 2005 it was estimated that 277 million people within LDCs live on less than $1 a day.

•In some cases poverty has been falling, however wit high population growth rates the number living in extreme poverty is increasing.

•There is a contrast between African and Asian LDCs
-In 2005 374 million Africans lived on less than $2 a day compared to 203 million Asians.

•Despite economic growth in some LDCs they are still reliant on external finance
-In 2006 net aid reached the record level of $28 billion with bilateral and multilateral mostly funding social infrastructure and services.

•In the worlds LDC's people have a poor quality of life because:

-Rising food prices leads to more malnutrition
-Climate change causes rural people to be unable to feed themselves, for example desertification or drought
-Diseases like Malaria are widespread (preventable diseases eg. TB and Measles kill 11 million infants each year)
-Some have high levels of HIV/AIDS
-500,000 women die during childbirth each year
-Lack of piped water, sewers, electricity, surfaced roads, hospitals and schools
-Depletion of aquifers

•Social Problems:

-Lack of income is not the only problems that LDCs face
-On 8th of September 2000 world leaders adopted a UN Millennium Declaration which lead to the establishment of the Millennium Development Goals (MDGs)
-These goals are meant to be met by 2015


Debt:

•The situation for LDCs is made worse by their extreme debt

•Repaying debts means there is no money for improvements in healthcare, education, infrastructure, etc., that would help development

•From the 1970s onwards, developing countries (especially LDCs) found themselves in a debt crisis

How did LDCs get into debt?

•Oil prices rose in the 1970s boosting the earnings of oil-exporting countries

•These countries invested in Western Banks who lent it to low income countries (LICs) to spend on development projects like dams, power stations and mechanisation of agriculture

•By the 1980s global interest rates more than doubled

•The LICs couldn't meet their debt repayments now so unpaid interest was added to the original loan

•Every year the amount increased and the debt burden got worse

•To prevent a collapse of the global banking system the international monetary fund (IMF) developed Structural Adjustment Packages (SAPs)

•These involved re-scheduling loans to make them more affordable in return for cuts on Government budgets and spending

•Governments in LICs (eg. Uganda) cut spending on healthcare and education and the poorest people suffered

•1996 the IMF and the World Bank produced the Heavily Indebted Poor Countries (HIPC) programme.

•This provided debt relief and low interest loans to reduce external debt repayments to sustainable levels

•This only happens on the conditions that countries meet various economic management and performance targets.


Multilateral Debt Relief Initiative (MDRI)

•In 2005 the G8 countries met in Gleneagles (Scotland) and proposed the cancellation of the entire debt of eligible HIPC.

•This was known as the Multilateral Debt Relief Initiative

•Countries would be eligible if they met the following criteria:
-Satisfactory economic performance under an IMF poverty reduction and growth facility programme
-Satisfactory progress in implementing a poverty reduction strategy
-An adequate public expenditure management system with minimum standards of governance and transparency

•By October 2007 16 LDCs were receiving debt relief under the HIPC initiative (all in Sub-Saharan Africa)

•These countries further benefitted from MDRI
-Total debts were reduced from $54.7 billion in 2005 to $25.7 billion in 2006

•Has it worked?
-The UN says debt relief is "a highly effective form of development assistance" as it frees up funds needed for essential services
-Over 32 of the poorest countries have received over £110 billion in debt cancellation
-In 10African countries that have had their debts cancelled there has been an increase of around 40% on education spending and 70% on healthcare.