The report analyses debt vulnerability across 120 low- and middle-income economies to identify which are most at risk. 72 economies are considered “vulnerable”, of which 19 are “severely vulnerable.”
Based on measures of sustainable debt thresholds and ratios, it concludes that debt vulnerabilities for these countries will likely remain elevated for years and not return to pre-pandemic levels before 2024-2025.
The greatest threat resulting from this setback, the report continues, is not a string of defaults but the possibility of a prolonged debt crisis that prevents governments from making critical investments to benefit their own people and address the climate crisis.
The group of 72 vulnerable countries will owe at least $598 billion in debt payments between 2021 and 2025, of which 52% is to private creditors. Low-income countries – which are eligible for relief through the “Debt Service Suspension Initiative” and “Common Framework for Debt Treatments Beyond the DSSI”, both from the G-20 group of nations – account for about 6% of the $598 billion, with the rest owed by middle-income countries.
Next to that, one of the most alarming findings is that 23 of the countries studied fall through the cracks in terms of mechanisms to combat the debt crisis. Owing about 65% of the total debt, most of them are middle-income countries that do neither qualify for the G-20 initiatives nor can they access low-cost capital in the way that the world’s wealthiest countries do.
The report’s findings reinforce calls by the DRGR initiative and others for bold global debt relief moves to secure private-sector participation and include middle-income countries. Read our report for more information or see the blog summary of the four proposed steps to transform the G20 Common Framework.