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A graph of countries where debt service exceeds new disbursements on official debt

Visualizing the Debt Service Drag on Developing Country Governments

The G7 countries pledged a massive scale-up in support of developing-country financing at their recent summit in the UK. How it will be financed remains an open question. But analyzing trends in recent debt flows by lenders to developing countries, and taking stock of the Debt Service Suspension Initiative (DSSI), can provide some important lessons for the G7’s new ambitions.

A worker at a power station in Kabul. Photo by Graham Crouch, World Bank

5 Principles on the Uses and Misuses of Debt Relief to Address the Coronavirus Pandemic

Debt relief for low-income countries is on the table of measures to consider for coronavirus response. The imperative right now is to get cash to LICs as quickly as possible. Suspending some debt service payments may be a good first step in freeing up some budget space for new spending. Beyond that, protracted debt-relief negotiations with multilateral and commercial creditors right now could be a distraction at best but could also actively undermine the ability of institutions like the World Bank to offer new financing for crisis response.

Liberia’s Debt Relief Party

This week, Liberians celebrated in the streets – faces painted, drums blaring, and dancing with abandon.  They’re not rejoicing over some recent triumph by the Liberian soccer team or a local festival.  The streets of Monrovia were overflowing because of debt relief.  That’s right, debt relief.  On Tuesday, Liberia secured nearly $5 billion in irrevocable debt relief from the World Bank, IMF, African Development Bank, and bilateral creditors.  It’s a massive sum

Cash for Poor Countries, or Another Round of Subprime Lending?

This is a joint post with Benjamin Leo.

A special new lending facility was announced in July 2009 with the objective of providing up to $17 billion in new loans through 2014 and, to entice cash-strapped borrowers, the lender is waiving interest payments for the first two years. This may sound like dangerous new short-term teaser offers for sub-prime borrowers. But this isn’t coming from Countrywide Financial. It actually is a new IMF facility for low-income countries, including some of heavily indebted poor countries (HIPCs) who are just barely coming out of the last debt crisis.

The stated objectives of the new IMF facility are laudable: to offset the effects of the global economic crisis by boosting international reserves and supporting adjustment policies. And yes, the overall terms are more concessional than past IMF loans. Nonetheless, the net impact on national debt levels may be significant. And it was just four years ago that the IMF committed to cancel roughly $6 billion in bad loans to many of these very same countries.

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