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Country Differences Call for Tailored Approaches to Debt Relief

Multinational Finance Journal, 2021, vol. 25, no.3/4, pp. 73–83

Abstract:
The G-20 Debt Service Suspension Initiative (DSSI) was endorsed effective May 1, 2020, in the midst of an unprecedented fall in government revenues and rapidly rising public expenditure following the COVID-19 shock and resulting deep economic contraction. By the end of 2020, 45 of the 73 eligible countries had participated in the initiative. By March 18, 2021, 24 countries had participated in the extended DSSI. The G-20 DSSI initiative will alleviate liquidity pressures for participating countries, but in general the savings from debt relief under the DSSI are modest relative to the fiscal deterioration brought about by the COVID-19 shock. Countries eligible for the DSSI and the Common Framework for Debt Treatments differ greatly in terms of their debt-to-GDP levels, debt sustainability positions and credit risk, potential benefits from DSSI debt relief, and creditor universe. This diversity will necessitate tailored approaches to debt relief, taking into account country-specific circumstances.

Keywords : DSSI; common framework; sovereign debt restructuring and default; country risk; creditworthiness; debt crisis
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