Kathmandu, November 19
The United Nations Conference on Trade and Development (UNCTAD) has suggested that least development countries (LDCs) must proactively ensure that external finance generated from all sources must be directed to national development priorities. It further said that it is the best way to manage their aid dependency and eventually escape from it. The report has also suggested that LDCs must undergo structural transformation to achieve Sustainable Development Goals (SDGs).
Releasing the global ‘LDCs Report’ today, UNCTAD has pointed out that aid-dependent countries have to rely on external finances due to low domestic savings, among other factors.
“For LDCs to attain the SDGs and escape aid dependency, they need external finance that is targeted at the structural transformation of their economies,” quoted UNCTAD Secretary-General Mukhisa Kituyi in the report.
As per the report, LDCs like Nepal should take ownership of their development agenda and manage the allocation of external development finance in alignment with their national development priorities. The international community also needs to step up its support towards this common goal, the report states.
The report has suggested that LDCs need to utilise official development funds in a manner that will help leverage private funds through blended finance, or public-private partnership. “The number of players in external financing has increased, with emerging developing country donors, non-profit organisations, and private commercial sources entering the field,” as per the report. However, it has mentioned that it will increase complexity of the financing system.
According to the report, LDCs need to mobilise and allocate the financing required for long-term investment in new productive sectors and activities, as well as the investments undertaken for the technological and organisational upgrading of existing sectors and producing units.
They should also establish and strengthen institutions necessary to undertake the financial analysis and planning and coordination for structural transformation, as well as those responsible for mobilisation of domestic financial resources, report says.
Releasing the report in Nepal, Ayshanie Medagangoda-Labe, resident representative of United Nations Development Programme, said Nepal needs to receive more external sources and finance to achieve SDGs as well as to graduate from the LDC status. “Critically, the linkage between external development finance and national development priorities is weakening.”
Moreover, this funding diversity has not translated into meaningful increase in development finance from all sources. Rather it has expanded the number of actors and instruments.
The report has also laid emphasis on the need for LDCs to strengthen state capacity, aid effectiveness agenda and manage development finance better. It also mentions that bold international actions are needed for the effective implementation of the agendas.
UNCTAD has, meanwhile, urged the international community to take action at the bilateral and multilateral levels to reinforce measures by LDCs at the domestic level and to address systemic issues of the international financial architecture that affect LDCs’ access to development finance.
The report has also identified the present and future of external development finance and new challenges. Structural transformation, SDGs and external development finance, official flows, evolving terms of development aid and private development cooperation and exter nal development finance, fiscal space, and lack of alignment with national development goals are also needed for meeting the agendas set for LDC