Reform of the International Debt Architecture is Urgently Needed

By Kristalina Georgieva, Ceyla Pazarbasioglu, and Rhoda Weeks-Brown عربي, 中文, Español, Français, 日本語, Português, Русский  The COVID-19 pandemic has pushed debt levels to new heights. Compared to end-2019, average 2021 debt ratios are projected to rise by 20 percent of GDP in advanced economies, 10 percent of GDP in emerging market economies, and about 7 percent in low-income-countries. These increases come on top of debt levels that were already historically high. While many advanced economies still have the capacity to borrow, emerging markets and low-income countries face much tighter limits on their ability to carry additional debt. Indeed, about half of low-income countries and several emerging market economies were already in or at high risk of a debt crisis, and the further rise in debt is alarming. Just as they are starting to recover from the pandemic, many of these countries could suffer a second wave of economic distress, triggered by defaults, capital flight, and fiscal austerity. Preventing such a crisis can make the difference between a lost decade and a rapid recovery that puts countries on a sustainable growth trajectory. As IMF research has recently shown, waiting to restructure debt until after a default occurs is associated with larger declines in GDP, investment, private sector … Continue reading Reform of the International Debt Architecture is Urgently Needed