United Nations describes issues in world's poorest nations.

The United Nations Conference on Trade and Development has issued its report on the world's poorest countries. The report says of countries with unsustainable debt. "There are obviously many reasons for the build-up of the debt, including domestic mismanagement and corruption. But the degree of probability that commodity-dependent countries with generalized extreme poverty run up an unsustainable external debt is so high that the debt problem is properly regarded as systemic, rather than simply a national issue."

The Report goes on " Once a country has an unsustainable external debt, this has a number of negative features that further reinforce the trap of generalized poverty. First, as a very large proportion of the debt is owed by Governments rather than the private sector, debt servicing reduces resources available for public investment in physical and human capital. Second, the debt overhang acts as a deterrent to private investment, particularly because of uncertainty. Domestic interest rates may also be very high. Third, debt service payments tighten the foreign exchange constraint. Fourth, high levels of external debt also deter private capital inflows, contributing to a general perception of risk that discourages lenders and investors. Although highly indebted countries still receive foreign direct investment (FDI), they have been effectively marginalized from international capital markets. One important consequence of this is that it is difficult to access short-term loans in order to moderate the effects of external and climatic shocks."

World Money Laundering Report has, on a number of occasions, considered the opportunities for laundering created by precisely the conditions which UNCTAD now says are endemic to poor economies - the lack of access to international finance being a significant example. The circumstances which UNCTAD describes are those in which the formal financial services system is either next to non-existent or so constrained by lack of access to capital that even micro-finance is beyond it.

This leads to the risk that money launderers, often expatriates who have committed crimes abroad, become a vital source of finance for those seeking to lift themselves out of poverty. It also leads to the production of drugs, which are a lucrative crop where no other sustains families.

Where governments are spending too great a proportion of their income on servicing debt, then the tax burden rises - even though the people cannot afford it. This means increased poverty and, as desperation sets in, increased crime.

The UNCTAD report might seem, at first sight, to have nothing to do with money laundering but the background it describes demonstrates how entire economies can find themselves at risk of becoming financed by money from outside the legitimate financing sector.