The COVID-19 shock has put a glaring spotlight on the difficulties arising from high and rising developing country indebtedness.
In 2020 and 2021 alone, repayments on developing countries' public external debt are estimated at nearly $3.4 trillion, between $2 trillion and $2.3 trillion in high-income developing countries and between $666 billion and $1.06 trillion in middle and low-income countries.
A developing country debt crisis, was already under way prior to the COVID-19 shock. At the end of 2018, the total debt stocks of developing countries, external and domestic, private and public, stood at 191 per cent (or almost double) their combined GDP, the highest level on record.
In many developing countries more than a quarter of government revenues are absorbed by debt servicing.
On 30 March, the UNCTAD called for a $2.5 trillion coronavirus package for developing countries. Even prior to the COVID-19 crisis, many of these countries faced high and rising shares of their government revenues going to debt repayments, squeezing health and social expenditures.
The IMF cancelled debt repayments due to it by the 25 poorest developing economies for the next six months. This debt cancellation is estimated to amount to around $215 million.
Leaders of the Group of 20 leading economies (G20) announced the suspension of debt service payments for 73 of the poorest countries from May to the end of this year.
UNCTAD proposed a four-pronged strategy which includes cancellation of around $1 trillion of debts this year owed by developing countries.