President Lazarus Chakwera has become a global champion for wealthy nations to cancel debt for the Least Developing Countries.
This is necessary for the poor nations, including Malawi, to achieve Sustainable Development Goals (SDGs) by 2030.
Chakwera reiterated this at the just-ended session of the United Nations General Assembly.
There are numerous multilateral initiatives for debt relief, cancellation, forgiveness, restructuring and swaps.
One of them is the Heavily Indebted Poor Countries (Hipc) Initiative launched by the World Bank in 1996.
In 2006, Malawi had debts cancelled by the Hipc initiative, which provides debt relief to eligible countries that implement economic reforms and meet certain targets.
The Multilateral Debt Relief Initiative (MDRI) by the International Monetary Fund, World Bank and African Development Bank supports Hipc countries that reach their completion point.
Debt relief is important because LDCs often face unsustainable debt that makes it difficult to invest in education, health, and infrastructure development programmes.
Debt relief can help spur economic growth and reduce poverty by freeing up resources to be invested in vital sectors.
Besides, debt relief is also a moral issue as LDCs are often saddled with debts caused by factors beyond their control, including climate-related and financial crises fuelled by wealthy nations.
Moreover, LDCs are important trading partners and employers for developed countries.
After all, a prosperous and stable world is in everyone’s interest.
However, LDCs need to address underlying challenges for developed countries to cancel their debts.
One of them is cost. Cancelling the foreign debt burden estimated at more than $500 billion is a no mean undertaking for the lenders.
It is also a moral hazard as some experts argue that debt cancellation would ramp up LDCs’ appetite to borrow aimlessly and default on loans knowing they would be forgiven with time.
Additionally, debt cancellation would also affect private lenders such as banks and investment funds, who may become less willing to lend to LDCs.
Debt relief is but one tool to help LDCs achieve the SDGs.
However, it calls for other important considerations such as good governance, economic freedom and greater investment in education and healthcare.
Transparency, accountability and the rule of law are vital to creating a stable and predictable environment for business investment and growth.
This can create jobs and economic growth to help LDCs achieve SDGs.
Second, removing trade barriers can help LDCs increase their exports, boost income and create employment for LDCs to achieve SDGs.
For example, the African Continental Free Trade Area (AfCFTA), which aims to eliminate tariffs on 90 percent of African countries’ products, is expected to boost the economy in Africa.
Greater investment in education and healthcare is crucial for economic development and long-term sustainability.
Quality education equips individuals with the necessary skills for the rapidly changing job market, enhancing employability, productivity and earning potential.
Affordable healthcare reduces absenteeism and increases productivity.
Governments can invest in vocational training programmes for emerging industries, while employers offer comprehensive healthcare benefits, reducing illness and absenteeism for increased income and accelerated economic growth.
Despite LDCs’ strides to achieve SDGs, they should work harder to address the stumbling blocks to SDGs.
The barriers include limited reference to SDGs in national budgets, lack of transparency and prudence in the utilisation of resources, widespread corruption in public institutions, weak monitoring and evaluation and data systems and limited private sector activities.
Debt cancellation is a complex issue, but essential for LDCs to achieve global goals.
Investing in other important factors, including good governance and education, can help LDCs to build a more prosperous and sustainable future.