Financing Strategies for LDCs Graduation in Asia and the Pacific: Key Sources, Trends and Prospects

The United Nations recognizes that productivity capacity building is the key for self-sustained growth and graduation of LDCs in Asia and the Pacific. To achieve this objective, substantial financing must be mobilized to invest in infrastructure, social development and climate change challenges. Despite the significant progresses made by the Asia-Pacific LDCs in restoring macroeconomic stability, deepening the banking sector and attracting FDI and remittances, for many, fiscal spaces remain narrow and financial markets largely inefficient and undiversified. An ambitious financing strategy would be needed to close the financing gap for graduation and to promote sustainable development, which includes strengthening of fiscal space, financial intermediation and exploring innovative financing mechanisms such as blended finance, promoting new form of development partnership and climate finance. In particular, the paper shows that an estimated total of $19 billion could be raised annually by the Asia-Pacific LDCs through targeted efforts to broaden tax bases, create enabling environment for FDI and reduce transaction costs of remittances, among others. An additional USD $15 billion could further be raised if DAC members fulfil their commitment of contributing 0.15-0.20 per cent of GNI for LDCs development.