The challenge is acute in low-income countries – half of which were in debt distress or at high risk of debt distress before COVID-19 arrived. This comes after a decade that saw the fastest, biggest, and broadest expansion of debt levels around the world, according to the Global Economic Prospects.
As policy makers in emerging market and developing economies look to shift from pandemic response to recovery, they’ll need to be careful not to prematurely withdraw fiscal support and look to increase the efficiency of public spending – all while balancing the need for debt sustainability.
Still, the debt burden will be felt long after the virus abates, as servicing costs rise, slowing recoveries and hindering efforts to address other development challenges – including climate change.
7. Complexity of Debt Reporting
There is more to debt than what meets the eye, if one goes by the findings of the Debt Transparency in Developing Countries report. That’s because reporting on debt isn’t a very straightforward exercise.
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