The COVID-19 Global Debt Crisis: How to Avoid It

Abstract

This paper analyse the looming COVID-19 global debt crisis. The high debt incurred during the pandemic period by many countries combined with tightening global financial conditions such as increase in interest rate can trigger a global debt crisis for heavily indebted countries. I suggest some actions to be taken by richer countries, heavily indebted countries and multilateral organisations to mitigate the looming COVID-19 global debt crisis. Richer countries who are creditors to poor countries should consider debt forgiveness, interest repayment holidays, debt-for-green swap and other debt relief options. Multilateral organisations should allow affected members to draw on their contributory fund, they should support the G20 Debt Service Suspension Initiative, and engage in debt forgiveness advocacy. Heavily indebted countries should restructure their debt, rebalance policy priorities, focus on alternatives to borrowing, manage their level of debt, and find better ways to manage shocks and crises.

Keywords: COVID-19, debt crisis, pandemic, debt restructuring, economic crisis, coronavirus, economic impact

JEL Classification: G21, G28, E00, I15, J20