Report: Responding to the Risks of COVID Debt Distress

Report by eminent experts offers recommendations to ensure governments emerging from debt distress can still invest in sustainable development.

As many countries continue to face severe economic pressures from the COVID-19 pandemic, the Friedrich-Ebert-Stiftung (FES) and the Consensus Building Institute (CBI) jointly convened the Roundtable on Responding to the Risks of COVID Debt Distress.

The Roundtable convened eminent experts with direct experience in dealing with debt distress at the policy and operational levels, including former senior government officials and private attorneys who have represented sovereign debtors, bilateral and multilateral creditors, and academics who have closely studied the recent history of sovereign debt restructuring. 

This report represents the consensus of the group on a set of recommendations that could make private creditor participation in managing the risks of debt distress more complete, more equitable, and more effective. The group also developed recommendations for integrating new and additional multilateral finance into restructuring, to ensure that governments emerging from debt distress are able to continue making investments for sustainable development.

In this context, the group sees many opportunities to build on existing commitments, policies, and tools for managing the risks of debt distress, including those established in response to the pandemic by the G20, Paris Club IMF, and MDBs, in order to minimize the risk of widespread debt distress. The most important challenges to meet are 1) ensuring that debt restructuring by vulnerable low- and middle-income countries on the basis of comparable treatment is sufficiently timely and inclusive to enable sovereign creditors to maintain public services and investments, and 2) providing additional public and private finance to meet the very substantial needs for investment in recovery and sustainable development.

The report was jointly launched by the Center for Global Development (CGD), FES and CBI on Tuesday, October 12, 2021. The virtual discussion included a presentation of the report and the views and reactions of a distinguished panel. 

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