Born Out of Necessity: A Debt Standstill for COVID-19
Center for Economic Policy Research; Policy Insight No. 103 (2020)
11 Pages Posted: 28 Apr 2020 Last revised: 13 May 2020
Date Written: April 27, 2020
The global downturn caused by the Covid-19 pandemic has the potential to send more than half the nations around the globe into debt distress in the near future. As of this writing, nearly a hundred countries have approached the IMF for assistance. Many, perhaps most, of these countries will need to move scarce resources away from debt service and towards battling the novel coronavirus. In response, the G20 has called for a temporary standstill on bilateral official debt sector debt owed by 72 of the poorest nations. To be effective (and to be fair), however, this temporary debt relief provided by bilateral creditors must be complemented by an equivalent effort from private sector lenders. Our policy paper argues that a comprehensive suspension of debt obligations is justified on the grounds of necessity and lays out a simple mechanism by which the private sector participation can be implemented immediately.
Keywords: debt standstill, COVID-19, sovereign debt
JEL Classification: G15, H12, H63, H74, H87, K22, K23
Suggested Citation: Suggested Citation