Growing out of the Developing Country Debt Crisis

Published on : 24.05.23

By: Ishac Diwan, 

By

Ishac Diwan &

Philippe Le Houérou

Facing a cascade of government defaults, China, the biggest creditor to the developing world, has insisted that multilateral institutions take a haircut. But the best way for lenders like the World Bank’s International Development Association to ease the burden of poor countries is by offering cheap financing.

The sovereign-debt crisis was high on the agenda at this year’s Spring Meetings of the World Bank and the International Monetary Fund, with all eyes on China, the biggest creditor to the developing world, and the International Development Association (IDA), the Bank’s fund for the poorest countries. With many low-income economies already in or at high risk of default, China has been reluctant to write down the value of its loans and insistent that multilateral institutions, including the IDA, share the burden alongside other creditors – a contentious stance that breaks with convention.

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