The COVID-19 pandemic has left a large dent in the government budgets of low-income countries (LIDCs). During 2020, they had no choice but to increase public spending to fight the pandemic at a time when shrinking economic activity depressed their revenues. In this blog post, we argue that while these efforts to expand the flow of concessional resources to LIDCs are laudable, they are unlikely to be sufficient and, going forward, some form of debt relief will be necessary to secure fiscal sustainability down the road for these countries.
CGD Policy Blogs
This blog sets out the EU’s position as an international creditor and offer thoughts for what role the EU could play in debt relief.
Sustaining Low-Income Countries’ Progress Towards the SDGs in a Post-COVID 19 World: What is Achievable?
Following on from the “Financing Low-Income Countries: Towards Realistic Aspirations and Concrete Actions in a Post-COVID World" conference in October, Mark Plant and Sudhir Shetty outline some of the key themes discussed at the conference.
Revisiting HIPC as Part of the COVID-19 Response: How did Commercial Debt Relief for Poorest Countries Work Last Time?
The G20 is calling on commercial creditors to follow their lead and extend a moratorium on their debt. But if past is precedent external commercial debt could be shaping up to be major fault line in the debt relief process moving forward.
HIPC with Chinese Characteristics: Why Yesterday’s Debt Relief Is the Wrong Point of Reference for Today’s Crises
Concerns about rising debt risks in developing economies were front and center at the annual meetings. HIPC is a useful reference point as we talk about a new round of debt crises. But thanks to the rise of China as a lender, the creditor community today looks much different from the HIPC creditor community—with implications for any resolution to a debt crisis.
When the world’s finance ministers and central bank governors assemble in Washington later this month. they would do well to focus on another looming debt crisis that could hit some of the poorest countries in the world, many of whom are also struggling with problems of conflict and fragility and none of which has the institutional capacity to cope with a major debt crisis without lasting damage to their already-challenged development prospects.
Debt relief is high on the Sudanese government’s agenda. This week’s budget proposals coming out of the White House indicate that Sudan may finally get its wish—but there’s something weird about where the money comes from. Here I offer an alternative.
With last week’s decision by the Trump Administration to extend the review period for permanent removal of long-standing sanctions on Sudan, the debate over the nature of future US engagement with Sudan will continue. As this month’s report of the Atlantic Council’s Sudan Task Force points out, US support for debt relief will be high on the Sudanese government’s agenda; such relief would unlock international financing that supports economic development and poverty reduction. What the report does not mention is that such relief would likely require significant new funds being appropriated by Congress.
The Asian Infrastructure Investment Bank's (AIIB) second loan to Tajikistan in the space of a year raises questions about lending on “hard terms” to poor countries. In its eagerness to meet the investment needs of Asian countries, is the AIIB going to get burned by lending at non-concessional rates to poor countries? Or, if a country becomes unable to pay all its bills, will it treat the AIIB as a preferred creditor and prioritize debt service payments over the needs of the poor?