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The debt pandemic

The COVID-19 pandemic has greatly lengthened the list of developing and emerging market economies in debt distress. For some, a crisis is imminent. For many more, only exceptionally low global interest rates may be delaying a reckoning. Default rates are rising, and the need for debt restructuring is growing. Yet new challenges may hamper debt workouts unless governments and multilateral lenders provide better tools to navigate a wave of restructuring. The IMF, the World Bank, and other multilaterals acted quickly to provide much-needed funding amid the  pandemic as government revenues collapsed alongside economic activity, while private capital flows came to a sudden stop. In addition to new loans from multilaterals, Group of Twenty (G20) creditors granted a debt moratorium to the world’s poorest countries. They have encouraged private lenders to follow suit - albeit with little success. […]