We Must Expand Debt Relief for Developing Countries
Before the COVID-19 pandemic struck, sovereign lenders were adamant about avoiding another major multilateral debt-relief effort. But the current crisis inevitably will force a reappraisal, and an extension of the current debt-service moratorium at least through 2021 should be the first step in that direction.
WASHINGTON, DC – Even before COVID-19 began its deadly spread across their borders, developing countries were absorbing severe economic shockwaves emanating from China and advanced economies. And now, in addition to tumbling commodity prices and plummeting export demand, they face a sharp drop in remittances from émigrés and expatriates, the disappearance of tourism, sudden and massive outflows of foreign capital, and depreciating currencies.
Almost overnight, dozens of lower-income countries became unable to repay their debts to sovereign and commercial creditors.
For all the talk of a global economic recovery later this year, developing-country policymakers increasingly fear a prolonged downturn. And now they must brace for the impact of a lethal disease while lacking both adequate health infrastructure and the financial firepower of advanced economies.