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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.

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  • 15.12.2023

    UKRAINE: OPTIONS FOR THE END OF THE DEBT MORATORIUM IN 2024

    In November 2023, the Ukrainian government adopted its budget for 2024. Around USD 40 billion in external support is needed to keep state functions running. Financing could also be made more difficult by the resumption of debt servicing to private pre-war bondholders ("legacy bondholders"). When the debt moratorium ends in…

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  • 6.10.2023

    New Analysis: Understanding IMF Debt Sustainability Analyses.

    The IMF is a powerful gatekeeper for financing and debt relief and sets the macroeconomic parameters and incentives for governments on how to deal with a critical external debt situation. At the centre of this are the IMF’s debt sustainability analyses. With a de facto monopoly on these analyses comes…

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