Debt distress among low and lower-middle income countries has long been an endemic global economic feature. The International Monetary Fund recently observed, based on its LIC debt sustainability framework, that 14% of countries face debt distress, 36% moderate distress and 39% low distress. Meanwhile, bilateral aid is down and net external financing flows are often negative.
Over past decades, the Heavily Indebted Poor Countries initiative, enhanced HIPC initiative and Multilateral Debt Relief Initiative eliminated much debt and, along with collective action clauses for market borrowers, became staples of the financial community’s work.
Yet, the problem of deep stress remains acute. One-size-fits-all approaches do not work…