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.
The pandemic has exacerbated the debt situation in the Global South: 135 out of 148 countries are critically indebted. More than three times as many countries as before the pandemic are already in debt crisis or directly threatened by debt distress. While there are insolvency procedures for individuals and companies, there is no…Mehr lesen ...
In the context of the COVID-19 pandemic, the global debt situation has deteriorated. Countries in all regions of the world will emerge from the pandemic with unsustainable debt levels. While it was possible to avoid a massive sovereign default wave in 2021, in many cases, this was only possible through…Mehr lesen ...