Debt and its dangers

Generous debt restructuring is necessary for its efficacy, but the dominance of the Paris Club of advanced economy lenders has diminished due to a rise in the share of private creditors

Debt fund

Illustration: Binay Sinha

Ashima Goyal
As governments around the world continue to spend in response to a series of shocks, public debt is rising dangerously. How can it be reduced?
Lessons from past crises: After the global financial crisis (GFC) of the late 2000s, G20 orchestrated a coordinated fiscal stimulus, which is more effective since part of one country’s fiscal stimulus leaks to others as its imports rise.

But there is a fundamental asymmetry since the US can print dollars to finance deficits, advanced economies (AEs) could borrow at low rates, but emerging markets (EMs) were left to face rating downgrades, outflows under global risk-offs and high borrowing costs that followed high debt, alone.
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of or the Business Standard newspaper

First Published: May 03 2023 | 10:32 PM IST

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