The United Nations conference on trade and development calls on the poorest countries to take a leading role in directing external loans and aid for their development. Developing Countries should take ownership of their development agenda and manage the allocation of external development finance in alignment with their national development priorities.
LDC criteria are reviewed every three years by the Committee for Development Policy (CDP) group of independent experts that reports to the UN Economic and Social Council. According to their per capital income, human asset and economic vulnerability, Currently 47 countries have been designed as least developed countries of the world, 32 from Africa’s, eight Asians and seven from Oceania countries.
As the report shows LDCs account for around 20 of the most aid-dependent countries due to persistent shortfalls in their domestic savings and per capita income. Except those who are oil-exporting countries, 50 percent of these countries have zero account capacity to general surplus and they are dependent on external resources for capital accumulation. As World Bank and international monetary fund debt sustainability framework In May 2019, five countries were in debt distress, 13 in high risk of debt, 17 moderate risks and nine were in low risk of debt. The report indicates that Ethiopia is at high risk of paying back its debt with zero account capacity. The country expansion of trade flows has largely failed to support the nation and commodity dependency. The resource gap remained about 15 percent of its GDP. In the latest report shows Ethiopia has 52 billion debts which are 26 billion of it is the external debt which covers 33percent of the GDP. Targeted aid less than 10 percent of it has reached the targeted area.
From the overall 23 percent of the gross disbursements of Ethiopia official development assistance flows in 2015- 2017 weight of aid for trade subcomponents Agriculture, forestry and fishing take the largest part followed by transport and tourism 6 percent, energy 4 percent, industry mining and construction 1.5 percent, business, and other services and trade policy and regulations 1 percent, banking, and finance 0.7 percent, communications 0.1 percent
Developing countries lose 100billion USD annually due to aggressive tax avoidance through the use of tax havens, tax envision and illicit finance flows are some obstacles to achieve sustainable and equitable growth. Reducing the illicit finance and arms flows, strengthening the recovery and export capacity, domestic and public resource mobilization, returns of stolen assets and combat all form of organized crimes is needed to strength there capacity. Developing countries should create a way to participate in private sectors on with national development priorities and the international community should revamp international development partnership and build up to aid management system. Aid flows relatively to economic variability’s has been on a steady decline since 2003.
Countries will typically need to qualify thresholds under at least two of the three criteria if the three year average per capital gross national income of the least developed countries has risen to the level of at least double and the performance is considered as sustainable the country will be eligible for the graduation from the list. Ethiopia has been listed as least developed countries for the last 40 years. And the government has planned to get out of the list until 2025 as middle-income countries.
LCDs have increased their debt more than doubling their external debt stock from 146 billion USD to 313 billion USD between 2007 and 2017.