A debt pandemic: Dynamics and implications of the debt crisis of 2020

Our latest briefing provides an overview of the dynamics and implications of the 2020 sovereign debt crisis. The prioritisation of creditor rights over the livelihoods of the population of developing countries is a well-known dead-end. Instead, the international community must recognise that the health and wellbeing of millions of people in developing countries is a precondition for debt sustainability.

The apparent financial resilience of developing countries in the aftermath of the Covid-19 shock is misleading. It is the result of a combination of cyclical factors in the form of sectoral adjustments and monetary policy responses triggered by the pandemic. Promoting a prompt return of countries to international financial markets without addressing the debt vulnerabilities exacerbated by the crisis will increase the external financial fragility of developing countries. In turn, it will require a growing transfer of resources from public borrowers to their external creditors over the coming decade. Until now, countries across the world have done so at great human and social costs to their populations. Continuing down this path will sound the death knell for the commitments under the 2030 Agenda, the Paris Climate Agreement and the Beijing Declaration.

 


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