“With sovereign debt risks elevated and financial constraints once again at the center of political concerns, a global cooperative approach is needed to achieve an orderly resolution of debt problems and avoid unnecessary defaults.”
Food and energy price hikes are hitting with particular hardship on low-income countries, and it is possible that need more grants and highly concessional financing.
The countries must undertake reforms to improve debt transparency and strengthen debt management policies to reduce risks.
Some 60% of low-income countries were already at risk of debt distress, the authors said. Rising interest rates in major economies could lead to a widening spreads for countries with weaker fundamentals, which would make it more costly for them to borrow.
The credit crisis was exacerbated by the China’s overseas lending decline, that it is dealing with solvency concerns in the real estate sector, COVID-19 lockdowns and problems with existing loans to developing countries, they said.
The actions taken by the main economies were insufficient, the officials said, noting that a freeze on official bilateral debt payments adopted at the start of the pandemic had ended, and no restructurings had been agreed under a framework established by the Group of 20 industrialized countries.
Options are needed for a broader range of countries, which are not yet eligible for debt relief.
“Malting through will amplify the costs and risks to debtors, creditors and, more broadly, global stability and prosperity,” they wrote. “In the end, the impact will be felt most by households that can least afford it.”
Source: Ambito
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