With many developing countries heading toward debt crises, the immediate priority for the international community is to avert more Sri Lanka-style meltdowns. That will require reforms to an outdated global debt-restructuring framework, as well as better use of existing institutions and policy instruments.
WASHINGTON, DC – Like the United States and other rich countries, developing countries had little choice but to borrow and spend heavily to deal with COVID-19. Poor countries’ already-high debt levels ballooned to a 50-year peak as a result. Then came the Russian invasion of Ukraine, which caused record increases in food, fuel, and fertilizer prices. And now that rising inflation has prompted interest-rate increases in advanced economies, developing countries’ currencies are declining in value, adding to their debt woes.
WASHINGTON, DC – Like the United States and other rich countries, developing countries had little choice but to borrow and spend heavily to deal with COVID-19. Poor countries’ already-high debt levels ballooned to a 50-year peak as a result. Then came the Russian invasion of Ukraine, which caused record increases in food, fuel, and fertilizer prices. And now that rising inflation has prompted interest-rate increases in advanced economies, developing countries’ currencies are declining in value, adding to their debt woes.