A summary of the situation:
- Flows changed in 2022:
- Massive negative net transfer from LLMICs to the private sector, negative net transfers to China, large positive net transfers from IFIs
- Implicitly, a bailout to creditors financed by global taxpayers
- And indebted countries get strapped with more debt to IFIs that cannot be restructured
- Massive increase in debt payments as share of tax revenues and GDP
- Meaning that countries are cutting budget to essential public services for economic and social development, such as education, knowledge, health, and critical public infrastructure
- And aren’t able to make investments needed for green transition—hurting themselves and the world
- Different debt stock situations across countries, from low to high
- But high coupon rates, an increasing debt service burden, and no access to credit markets are common features for distressed countries
- “Access” like that of Kenya at exorbitant interest rates only “kicks the can down the road,” worsening eventual resolution
- Even if countries manage to forestall debt defaults, there is a development and environmental crisis going on