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.
In Search for Consensus. A Sovereign Insolvency Procedure as a Way Out of the Debt Crisis?
“The issue of sustainable debt is probably one of the biggest challenges we're currently facing. We are talking about fighting climate change, we're talking about global challenges such as migration, digital transformation. And when certain countries are facing an unsustainable level of debt, we really need to have a new…Mehr lesen ...
New focus paper: The Potential of National Legislation for the Fair Resolution of Global Debt Crises
To effectively deal with debt crises, it is crucial to ensure the participation of all creditors, especially private creditors in debt relief measures. But how can uncooperative creditors be prevented from suing for their claims in national courts, thereby undermining multilateral agreements? This new focus paper examines the potential that…Mehr lesen ...