What Has Been the Impact of COVID-19 on Debt? Turning a Wave into a Tsunami
This paper presents a comprehensive analysis of the impact of COVID-19 on debt, puts recent debt developments and prospects in historical context, and analyzes new policy challenges associated with debt resolution. The paper reports three main resu...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/undefined/801991638297695658/What-Has-Been-the-Impact-of-COVID-19-on-Debt-Turning-a-Wave-into-a-Tsunami http://hdl.handle.net/10986/36647 |
| Summary: | This paper presents a comprehensive
analysis of the impact of COVID-19 on debt, puts recent debt
developments and prospects in historical context, and
analyzes new policy challenges associated with debt
resolution. The paper reports three main results. First,
even before the pandemic, a rapid buildup of debt in
emerging market and developing economies—dubbed the “fourth
wave” of debt—had been underway. Because of the sharp
increase in debt during the pandemic-induced global
recession of 2020, the fourth wave of debt has turned into a
tsunami and become even more dangerous. Second, five years
after past global recessions, global government debt
continued to increase. In light of this historical record,
and given large financing gaps and significant investment
needs in many countries, debt levels will likely continue to
rise in the near future. Third, debt resolution has become
more complicated because of a highly fragmented creditor
base, a lack of transparency in debt reporting, and a legacy
stock of government debt without collective action clauses.
National policy makers and the global community need to act
rapidly and forcefully ensure that the fourth wave does not
end with a string of debt crises in emerging market and
developing economies as earlier debt waves did. |
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