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Ukraine War Risks Further Cuts to Finance Development

The conflict is tightening global liquidity, especially for developing countries, as investors flock to assets perceived as less risky.

Ukraine War Risks Further Cuts to Finance Development

The financial fallout from the war in Ukraine could widen the already huge gap in financing needed to achieve sustainable development goals (SDGs) and lead to cascading credit downgrades and debt defaults in developing countries, UNCTAD said.

The gap in financing needed to achieve SDGs, such as ending poverty and halting climate change, now sits at $17.9 trillion for the 2020-2025 period, new UNCTAD estimates show. This puts the current annual gap at $3.6 trillion – more than $1 trillion wider than before the COVID-19 pandemic – without even factoring in the effects of the Ukraine conflict.

“We risk going from having a gap to achieve the SDGs to having an abyss,” UNCTAD Secretary-General Rebeca Grynspan said on 21 March as she opened a meeting on financing for development convened by the organization.

Calling for emergency measures and efforts to support sustainable growth, she said climate change and other non-stop crises are hitting developing countries hardest and making it harder for them to achieve the SDGs.

“Shock after shock, their debt burdens rise, their poor become more numerous, their fiscal space shrinks and their sustainable development goals fall increasingly out of reach,” Ms. Grynspan said.

Tightening global liquidity

The $17.9 trillion figure is likely an underestimate, Ms. Grynspan said, because the calculations were done before the start of the war in Ukraine in late February.

The conflict is tightening global liquidity, especially for developing countries, as investors flock to assets perceived as less risky. The cost of credit has already increased since the start of the conflict, with bond yields rising an average of 36 basis points.

The war’s impact on government spending around the globe will put further pressure on aid budgets, which were already low.

“External financial resources for development continue to decrease, which has been especially detrimental to low-income and middle-income countries,” said Abdulla Shahid, president of the 76th session of the UN General Assembly.

In 2020, official development assistance from advanced economies was on average just 0.32% of their gross national income – less than half of the 0.7% commitment.

Cascading effects on debt

Capital flight and less development assistance would create acute stress for many developing countries already struggling with high debt levels. Cascading credit downgrades and debt defaults could be on the horizon.

More than half of African countries were already downgraded by at least one credit rating agency in 2020, said Vera Songwe, executive secretary of the UN Economic Commission for Africa.

“The Ukraine crisis will likely lead to more downgrades as possible contagion spreads across emerging markets,” Ms. Songwe said.

In 2020, debt-to-GDP ratios in developing countries rose to 69% from 57%. For these nations, about 16% of export earnings are spent on debt payments. The share reaches 34% in small island developing states.

The debt burden undermines their abilities to provide essential services. In 62 developing countries, for example, the share of government spending on debt service was higher than health spending in 2020.

Emergency financial measures needed

To keep the gap from becoming an abyss, Ms. Grynspan called for emergency financial measures to help developing countries cope with the impacts of the war in Ukraine – including soaring prices of food, fuel and fertilizer.

According to an UNCTAD assessment, more than 5% of the poorest countries’ import baskets is made up of products that are likely to face a price hike due to the war. The share is below 1% for richer countries.

Such emergency measures would be similar to those provided by the global financial system when the COVID-19 crisis started.

One suggestion was to reconvene the Group of 20 major economies’ debt service suspension initiative (DSSI), which froze debt repayments for low-income countries until December 2021.

“But we also need to restart the DSSI in way that doesn’t just keep kicking the can down the road,” Ms. Grynspan said. “A permanent and comprehensive debt restructuring mechanism is needed.”

Strengthen productive capacities

In addition to emergency measures to reduce costs, Ms. Grynspan called for collective efforts to promote sustainable growth in developing countries.

The efforts should be underpinned by a sustained and structural push to help the countries strengthen productive capacities so they can make more goods and services and add more value to them.

Ms. Grynspan also called for more long-term strategic investments involving the private sector and local, regional and multilateral development banks.

“We urgently need to capitalize our development banks, something that didn’t happen with the pandemic,” she said.

U.S. Secretary of Commerce Gina Raimondo Stresses President Biden’s Executive Order on “Ensuring the Responsible Development of Digital Assets”

Following President Biden’s signing of an Executive Order on “Ensuring the Responsible Development of Digital Assets” that establishes a Federal government-wide approach to the development of the digital assets industry, Secretary of Commerce Gina M. Raimondo today in Washington proceeded in stressing the needs and benefits of the order.

He said “President Biden has identified a bold and prudent path forward for a whole-of-government approach to encourage responsible innovation in digital assets, including cryptocurrencies, stable coins, and central bank digital currencies. This Executive Order will ensure that our policy on digital assets safeguards our financial system and promotes American leadership.

“Over the last two decades, the market of digital assets and related technologies has evolved into a multi-trillion-dollar global industry. Digital assets have profound implications for the American economy at all levels: for national and state regulators, established businesses and startups, and, above all, individuals. Digital assets and associated technologies could hold significant potential for individual economic empowerment, financial inclusion, and reinforcement of America’s position as a world leader in innovative financial services.

“As is the case for the digital assets market, innovation and growth tend to be accompanied by emerging challenges. As threats to the security and integrity of our financial system scale, the Department remains committed to addressing them and supporting our partners across sectors in their anti-money laundering efforts, countering terrorist and other illicit financing, and combatting other abusive activities. We can and will ensure that our digital assets industry is a global leader while promoting the resilience of the U.S. financial system by working with our industry partners to mitigate risks for the businesses and individuals who rely on it.

He concluded “I particularly welcome President Biden’s direction to engage with industry, civil society, and other interagency partners in developing a framework to promote U.S. economic competitiveness by leveraging digital asset technologies and remain eager to hear what we can do to promote the secure and inclusive development of this growing part of our financial services system.

“As in all industries, America’s innovation is its strength. Working together, we will work to ensure that American businesses remain globally competitive in this space through the responsible development of digital asset technologies.”


When Cash Is Devalued, Where Should Investors Look For Salvation?

With a difficult 2020 receding into the past, investors are left to wonder what lies ahead for them, the economy, and their portfolios in 2021.

Unfortunately, they may find that some investing decisions are still tied to the events of last year.

Because of how the COVID-19 pandemic affected the economy, the Federal Reserve saw to it that enormous amounts of money were printed in 2020. That effort to shore up the economy also set off debates about inflation.

Reports show that in excess of 23% of the U.S. dollars now in circulation were created in just the last year, says Toby Mathis, a tax attorney, founding partner of Anderson Law Group ( and current manager of Anderson’s Las Vegas office.

“This bodes well for gold and cryptocurrency as hedges, but really means investors need to be in dividend-paying stocks and real estate to avoid the hard blow of the effect of the U.S. monetary policy,” he says.  “Essentially, your cash is being devalued, so you need to buy assets that pay you.”

Mathis’ tips for investors in these tenuous times include:

When investing in real estate, target low-priced rental properties. For inexperienced investors, real estate shouldn’t be the first option, Mathis says. But for those with some investing savvy, it’s a good addition to their overall investing strategy – if they are careful about making the right moves. “You want to save up for your first property, and buy with cash,” he says. “This is the best bet for this investment actually making you money. You should pull that extra cash from stocks, or savings, and purchase a rental property between $70,000 to $120,000. Yes, properties at that price do in fact exist. You’ll find them outside of the big cities with increasing populations.”

Realize that stocks are more liquid than real estate. While Mathis praises real estate as an investment, he acknowledges it has its drawbacks if you suddenly need cash. Stocks can be bought and sold much more quickly. “I can buy a share of a stock and I could sell it tomorrow and get access to that cash within two days,” he says. “If I buy real estate, I could buy it today but I’m probably not going to be able to close tomorrow. Even if I buy with cash, it’s still going to be a week or two. And usually, your closing is going to take 30 to 60 days.” The same is true when selling real estate. “If you have an unexpected life event — your car breaks down, you lose a job, you have a medical emergency — stocks are much more liquid,” Mathis says. “You can turn them into cash much easier than you can real estate.”

Look for stocks that pay dividends. Mathis says investing in stocks is a smart move for both experienced and inexperienced investors, but he also cautions that not all stocks are equal. Some pay dividends, some don’t. He recommends avoiding the latter. “If you’re investing in stocks that don’t pay dividends you’re leaving close to half of the benefits by the wayside,” he says. “And you’re not going to do as well. You have to invest in dividend-producing companies to see true growth.”

“When people ask me whether to invest in real estate or the stock market, my answer is always ‘yes,’ “ Mathis says. “Either one can be great. I still say stocks are best for investors who are just starting out and need to gain some knowledge and experience, but ultimately you would like to have both.”


Toby Mathis, author of the upcoming book Infinity Investing: How the Rich Get Richer And How You Can Do The Same, is a founding partner of Anderson Law Group ( and current manager of Anderson’s Las Vegas office. He has helped Anderson grow its practice from one of business and estate planning to a thriving tax practice and national registered agent service with more than 18,000 clients. In his work as an attorney, Mathis has focused exclusively in areas of small business, taxation, and trusts. Mathis has authored more than 100 articles on small business topics and has written several books on good business practices, including Tax-Wise Business Ownership and 12 Steps to Running a Successful Business.