A Pandemic of Debt
Hammered by tightening financial conditions and steep currency depreciations, dozens of developing countries are either teetering on the edge of a debt crisis or have already defaulted. The international community must respond by providing immediate relief, creating new restructuring mechanisms, and introducing ambitious reforms.
BOGOTÁ – The COVID-19 pandemic increased low- and middle-income countries’ debt levels to a 50-year high. With soaring inflation, rising interest rates, and the strengthening US dollar compounding their debt-service burdens, a crisis is now unfolding in several countries of the developing world.
The Economist has identified 53 vulnerable countries that have either defaulted on their debts or are at high risk of debt distress. While it is true that most of these countries are among the world’s poorest, a growing number of middle-income economies are also facing severe debt problems. According to the World Bank, nearly 60% of all emerging and developing countries have become high-risk debtors.
To gauge the full scope of this crisis and identify possible solutions, we must first consider these economies’ key characteristics and their public-sector liabilities. The 53 debt-distressed countries that The Economist identified represent 18% of the world’s population – more than 1.4 billion people – but just 5% of global GDP.
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