Many governments in the emerging world face a difficult conundrum: how to balance the short-term health risks of Covid-19 against the long-term impact of lost livelihoods.
Underdeveloped health systems and fragile economies mean that many of these countries lack the fiscal firepower to tackle disease or the economic downturn.
A suspension of debt payment will release vital funds to tackle the crisis and this seems increasingly likely after private and official creditors agreed to collaborate on a debt freeze effective May 1. Debt Service Suspension Initiative (DSSI) will apply to 77 countries with outstanding debt of $ 140 billion.
But the process is complex and unless solutions are developed to ensure debt sustainability and continuous access to capital markets in the future, it might do more harm than good.
This requires meaningful collaboration among all stakeholders … to ensure that countries are not stigmatized for asking for help
This requires collaboration among all stakeholders – the Paris Club, the G20, China, multilateral development banks, private creditors, rating agencies and governments – to ensure that countries are not stigmatized for having asked for help.