布鲁金斯学会-债务困境与发展困境：2021年的两次危机（英文）-2021.3-35页_836kb

Debt Distress and Development Distress: Twin Crises of 2021

Core Content

This paper by Homi Kharas and Meagan Dooley from the Brookings Institution analyzes the intertwined challenges of debt distress and development distress in the context of the global economic impact of the COVID-19 pandemic. It argues that these two crises are not separate but rather interdependent, with the current global financial system failing to provide adequate and equitable financing for developing countries.

Main Views

• Debt and Development are Linked: Debt distress often results from development failures, such as poor investment, consumption-driven spending, or corruption. However, in 2021, many developing countries face a different scenario where debt overhang threatens development progress, even if their economies were previously on a sustainable path.

• The Need for Coordinated Global Action: The paper emphasizes the importance of coordinated international efforts to address both debt and development crises, as the current system is not effectively allocating global savings or providing sufficient liquidity support.

• Debt Relief and Investment in Renewables: It highlights the need for debt forgiveness and coordinated new lending as complementary tools to address debt overhang. Additionally, it underscores the importance of access to affordable capital for developing countries to invest in renewable energy and avoid locking in a high carbon footprint.

Key Information

I. Introduction

• The global economy faces a twin crisis of debt and development distress due to the impact of the pandemic.
• Sustainable development is critical for building global economic resilience and addressing climate change.
• Emerging markets and developing countries need to continue borrowing and investing, but the private sector is not a viable substitute for this.
• Global financial institutions (GFIs) are expected to play a central role in providing financing, but their response has been limited compared to past crises.

II. One Year into the Crisis

• Economic growth in EMDEs is expected to rebound to 5%, but inequities in access to finance persist.
• The IMF has been the main provider of short-term liquidity, but only a small fraction of the needed financing has been allocated.
• Credit rating downgrades and liquidity constraints are significant challenges for many developing countries.
• DSSI (Debt Service Suspension Initiative) has provided $5 billion in deferred debt service payments, but its scope is limited and it excludes many middle-income countries in need.

III. Addressing the Debt Overhang and Debt Crises

Debt Service Suspension Initiative (DSSI)

• Launched in April 2020, DSSI provides temporary relief to low-income countries.
• 46 out of 73 eligible countries are participating, with $5 billion in deferred payments.
• DSSI does not reduce the net present value of debt but extends maturities.
• Type 1 and Type 2 errors exist: excluding deserving middle-income countries and including low-income countries where debt forgiveness might be more appropriate.

G-20 Common Framework for Debt Treatments

• Agreed in November 2020, this framework aims to support debt restructuring for DSSI-eligible countries.
• It promotes fair burden sharing among all creditors, including private ones, though private participation is voluntary.
• Chad, Ethiopia, and Zambia have requested debt relief under this framework.
• China is a significant creditor in many cases, but its role is unclear—whether as public or private.

Case Studies

Kenya

• Not DSSI-eligible but received $2.1 billion in support from multilateral institutions.
• Faced credit rating concerns and opted out initially but later requested relief.
• $620 million in bilateral debt is now eligible for DSSI, but $408 million is due to multilateral and private creditors.

Sri Lanka

• Lower-middle-income country, not eligible for DSSI.
• Has a high debt-to-GDP ratio (67%) but strong growth over the past decade.
• $4.5 billion in debt service due in 2021, with $820 million in IFI support in 2020.
• Vulnerable to natural disasters and economic shocks, requiring more support.

Limitations of Current Initiatives

• Private creditors are not participating in DSSI or the G-20 framework, leading to inequitable burden sharing.
• Debt relief programs like HIPC have had mixed results, often failing to address long-term debt dynamics and public expenditure management.
• Limited eligibility of DSSI excludes many countries in debt distress, including some middle-income ones.

Conclusion

• The paper calls for reforming the international financial architecture to address structural weaknesses that have contributed to the current crises.
• Accountability and transparency in public spending are crucial to prevent corruption and build trust.
• Global cooperation is essential to ensure equitable access to financing, debt sustainability, and sustainable development.

Proposals

• Expand DSSI eligibility to include more countries.
• Create a coordinated mechanism for private creditor participation.
• Issue additional Special Drawing Rights (SDRs) to support developing countries.
• Improve public expenditure management to maximize the impact of debt relief and development financing.
• Reform the international financial system to better align with the needs of developing countries.