ABSTRACT
This chapter describes the way in which the global crisis has affected and still weighs on developing countries, focusing on overall debt sustainability and the progress and targets of the Heavily Indebted Poor Country (HIPC) and Multilateral Debt Relief Initiative (MDRI) Initiatives. It explores the economic crisis and the subsequent higher demand for funds from poor countries that have forced the International Monetary Fund (IMF) to undertake a substantial revision of its lending instruments to poor countries and to double its borrowing limits, in order to meet the increased needs of Low Income Countries (LICs). The current financial turmoil and the associated reduction in trade, foreign aid and capital flows might trigger another debt crisis in LICs. Even if LICs' financial systems are not directly part of the financial crisis, the extremely large foreign participation in the banking system does have adverse effects on small business finance and entrepreneurship.
