G20’s response to debt distress: The case of Sri Lanka
This article is authored by Aditya Gowdara Shivamurthy from ORF.
With new challenges and changes in the world order, countries across the globe are embracing new partnerships and risky engagements to fuel their economic growth. The economic crisis in Sri Lanka illustrates this challenge of debt sustainability and management among middle-income countries. This brief uses the economic crisis in Sri Lanka as a case in point to highlight the following challenges: The China-led alternative financial system has severe implications for middle-income countries, and the G20 grouping and countries lack a coherent approach to deal with the piling debt burdens of middle-income nations. This brief recommends the G20 grouping and countries to promote multilateral reforms, transparency, and swift response, as well as extend new initiatives to help middle-income countries address increasing debt burdens.
The Covid-19 crisis and Russia’s war on Ukraine have continued to squeeze the global economy. Despite a global debt reduction of $4 trillion in 2022, the nominal value of debt has continued to remain over $300 trillion for the past three years. Wealthy countries are seeing a decline in total debt, while developing countries have achieved a record high debt of $98 trillion. Middle-income countries witnessed their external debt to GNI ratio increase to 28% in 2020 and 25% in 2021. As risks of unsustainable borrowing amongst the middle-income nations persists at large, this brief uses the crisis in Sri Lanka as a case in point to outline the following challenges.
The paper can be accessed by clicking here.
This article is authored by Aditya Gowdara Shivamurthy from ORF.
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