Partnerships for the Goals

This publication was prepared by UNCTAD.

This publication monitors the trends of international trade in goods and services in the medium term. It also provides highlights and summarizes the most significant changes in trade patterns that have occurred during the previous year.

The cascading crises laid bare the asymmetry between the two financially integrated country profiles (EMEs and FMEs) in accessing external finance.

Two primary factors can derail a country’s capacity to service its debt smoothly.

This study examines the external debt vulnerabilities of developing countries through the lens of their financial integration profiles. Three groups of countries are identified: Emerging-Market Economies (EMEs) mostly upper-middle-income developing countries that have integrated into global capital markets since the 1990s; Frontier-Market Economies (FMEs) defined here as the group of developing countries with mainly low- or lower-middle-income levels that began to access these markets after the Global Financial Crisis of 2008 (GFC) and Other Developing Economies (ODEs) which are associated with low degrees of integration into the international capital markets and rely mainly on external public financing and Official Development Assistance (ODA). The analysis employs the sovereign debt life cycle framework to highlight differences in debt acquisition servicing repayment and resilience across these groups. EMEs have the highest exposure to private creditors with 67 per cent of their Public and Publicly Guaranteed (PPG) debt privately held in 2022. FMEs’ exposure to private creditors has doubled since 2010 reaching 32 per cent while ODEs maintain low private-sector exposure at 17 per cent. This creditor composition influences financial outcomes with EMEs experiencing the largest negative net transfers in 2022 (-$32 billion) compared to FMEs (-$2.2 billion) and ODEs (+$10.2 billion). FMEs face significant challenges due to speculative-grade sovereign bonds higher borrowing costs and rising external debt servicing. Between 2010 and 2023 external interest costs for FMEs grew by 15.5 per cent annually double the rate for EMEs and ODEs. Debt service relative to government revenues surged from 6.3 per cent to 14.7 per cent for FMEs compared to 3 per cent for EMEs and 7.3 per cent for ODEs. The external debt service-to-export ratio for FMEs tripled to 18.7 per cent exacerbating their solvency risks. Access to the Global Financial Safety Net (GFSN) is uneven across these groups with EMEs benefiting from regional financial arrangements and bilateral swap lines. At the same time FMEs and ODEs primarily rely on IMF conditional financing. Rising debt service costs outpacing export and revenue growth threaten external and public financial sustainability especially for FMEs and ODEs. Between 2017 and 2023 two-thirds of developing countries saw worsening financial sustainability with external and public debt draining resources for development goals. The report underscores the need for transformative reforms in the global financial system to reduce financing costs and improve debt dynamics. Although changes will be gradual and apply mainly to new borrowing addressing these challenges is critical to supporting sustainable development and achieving the 2030 Agenda and Paris Agreement goals.

The UNCTAD-led eTrade for all initiative launched at the fourteenth session of the United Nations Conference on Trade and Development (UNCTAD XIV) in July 2016 is a practical example of how to harness the digital economy in support of the 2030 Agenda for Sustainable Development.

Within the UNCTAD Division on Technology and Logistics the E-commerce and Digital Economy Branch carries out policy-oriented analytical work on the development implications of information and communication technologies (ICTs) e-commerce and the digital economy.