Covid-19 Compounds Developing Country Debt Burdens

By Anis Chowdhury and Jomo Kwame SundaramSYDNEY and KUALA LUMPUR, Jul 23 2020 (IPS) Covid-19 is expected to take a heavy human and economic toll on developing countries, not only because of contagion in the face of weak health systems, but also containment measures which have precipitated recessions, destroying and diminishing the livelihoods of many. Limited fiscal space Developing countries generally have limited fiscal capacities to finance relief and liquidity provision in the short-term while rebuilding economic life on a more sustainable basis in the longer-term. Anis Chowdhury The 2020 Financing for Sustainable Development Report shows debt vulnerability growing in many developing countries well before the pandemic. For example, public sector borrowings of commodity exporters increased substantially after prices collapsed in 2014-15. With these prices further depressed now, the pandemic will increase developing country debt. Investors withdrew nearly US$80 billion from emerging markets in the first quarter of 2020 – the largest capital outflow in history, according to the Institute of International Finance – as remittances fell at least 20%, i.e., by over US$100 billion. Most other developing countries do not have strong enough credit ratings to secure low-cost foreign sovereign debt despite low interest rates in the North. Ballooning debt According to the World Bank’s recent Global Waves of Debt, the past decade has seen the largest, fastest and most broad-bas...
Source: IPS Inter Press Service - Health - Category: International Medicine & Public Health Authors: Tags: Development & Aid Economy & Trade Featured Financial Crisis Global Headlines Health Humanitarian Emergencies TerraViva United Nations Jomo Kwame Sundaram & Anis Chowdhury Source Type: news