In this comment, Jesse Griffiths argues that to avoid a devastating debt crisis across the developing world sparked by Covid-19, debtor countries will have to stand together and negotiate hard with creditors to agree necessary debt standstills, restructurings and debt cancellation. Promising signs are emerging that African countries are beginning to provide this necessary leadership.
This week, G20 leaders agreed to suspend debt repayments for 76 of the world’s poorest countries until the end of the year, and the IMF cancelled debt repayments for a smaller group of 25 countries for up to two years.
Developing countries have been hit hard, not just by the Covid-19 health crisis and the economic fallout resulting from the measures they are taking to combat it, but also by a wave of external shocks. Large scale capital flight is sucking private finance out of their countries, the value of their currencies is falling, and the price of commodities – on which many of the poorest countries depend for exports – have slumped.