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To finance development, many poor countries have to take recourse to external loans. By itself this is not bad or dangerous because the debt can be used to , f. i., invest in infrastructure, raising the output of the economy.
But if loans are taken and given without considering the economic capacity of the debtor, the repayment could become a problem. In the 1970s and 1980s this led to the so called “Third World Debt Crisis”. Today we can observe a similar trend: Poor countries in Africa, Asia and Latin America have comparatively easy access to fresh money because low interest rates in the Global North make investments in the Global South very attractive.
Rules for responsible borrowing and lending are important since they make clear, that creditor and debtor share responsibility for the success of the lending operation.
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Out now: Global Sovereign Debt Monitor 2024
Compared to the years during the COVID-19 crisis, in some countries of the Global South the debt situation has slightly eased. For most countries there, however, the debt situation remains tense. In 130 of the 152 countries surveyed in the Global South, the debt situation is at least slightly critical;…
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THE WINNER TAKES ALL – THRICE!? SRI LANKA’S RESTRUCTURING WITH PRIVATE CREDITORS
After Sri Lanka defaulted in spring 2022, the country entered into debt restructuring negotiations with its creditors. The majority of Sri Lanka's private creditors then joined together in a creditors' committee and submitted a restructuring proposal to Sri Lanka in October 2023. In the legal dispute with Hamilton Reserve Bank,…
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