Borrowing, both by governments and private enti¬ties, is an important tool for financing investment critical to achieving sustainable development, as well as for covering short-term imbalances between rev¬enues and expenditures. Government borrowing can also allow fiscal policy to play a countercyclical role over economic cycles. However, high debt burdens can impede growth and sustainable development. Debt has to be well managed in both public and private spheres. Developing countries made considerable pro¬gress in reducing their external debt in the early part of the century, assisted especially in the case of the heavily indebted poor countries (HIPCs) by the support of the international com¬munity.
Managing sovereign debt and addressing debt crises when they do occur has been on the agenda of Financing for Development (FfD) since the Monter¬rey Consensus, and is addressed in section II.E of the Addis Agenda and in this chapter in the Task Force report. Mitigating the danger of private debt build-ups is also addressed in the discussion of financial regulation in chapter II.F on systemic issues, while promoting long-term finance and the development of local capital markets is discussed in chapter II.B on the private sector.