The world’s poorest countries are facing a growing debt crisis. The International Monetary Fund (IMF) reported last fall that more than half of low-income developing countries are in or at high risk of debt distress, and about one-fifth of emerging markets have sovereign bonds trading at distressed levels. Meanwhile, in many lower-middle-income countries, escalating debt vulnerabilities and overlapping crises—the Covid-19 pandemic, the war in Ukraine, and the increase in global interest rates and risk aversion—are forcing a growing number of countries to seek debt restructuring from external creditors.
This emerging debt crisis has roots going back nearly 30 years. The Heavily Indebted Poor Countries (HIPC) program,…
