Debt Problems Plague Developing Nations: G20 Summit to Address Crisis

The persistent and damaging debt problems affecting a number of developing nations will be a central topic during the upcoming G20 summit in Delhi. These countries are grappling with mounting debt, posing significant challenges to their economic stability. Let’s take a closer look at some of the nations currently facing debt-related issues.

Pakistan:

Pakistan requires over $22 billion to service external debt and cover other fiscal obligations for fiscal year 2024. An interim government is in place until the upcoming election, scheduled for November. High inflation and interest rates are compounding the economic challenges. An 11th-hour deal with the IMF for a $3 billion bailout was reached in June, followed by financial support from Saudi Arabia and the UAE.

Zambia:

Zambia was the first African country to default during the COVID-19 pandemic. A $6.3 billion debt restructuring deal with the “Paris Club” creditor nations and China was secured in June. Progress in addressing its debt issues is seen as a success for the G20 Common Framework initiative.

Sri Lanka:

Sri Lanka announced a debt overhaul plan in June, making progress in some areas. Holders of domestic, dollar-denominated Sri Lanka Development Bonds (SLDBs) agreed to exchange their bonds. Delays have occurred in parts of the domestic debt plan, affecting negotiations with foreign creditors and the IMF.

Ghana:

Ghana defaulted on most of its external debt at the end of last year. The government aims to reduce international debt payments by $10.5 billion over the next three years. Progress has been relatively swift, with plans to tackle domestic debt and reach agreements with bondholders.

Tunisia:

Tunisia faces a full-blown economic crisis, with most debt being internal. Foreign loan repayments are due later in the year, and credit ratings agencies have warned of possible default. Negotiations with the IMF have faced challenges.

Egypt:

Egypt has around $100 billion of hard currency debt to pay over the next five years. Debt interest payments consume a significant portion of government revenues. Support from Gulf nations like Saudi Arabia is crucial to its economic stability.

El Salvador:

El Salvador has transitioned from financial concerns to becoming a bond market favorite. Debt buybacks and fiscal policies have contributed to its improved economic outlook. President Nayib Bukele’s popularity has boosted confidence in the country’s financial stability.

Kenya:

Kenya’s public debt stands at nearly 70% of GDP, raising concerns of debt distress. Government measures, including tax hikes, aim to address the issue. Negotiations with international financial institutions are ongoing.

Ukraine:

Ukraine froze debt payments in 2022 following Russia’s invasion. Post-war rebuilding costs are estimated at over 1 trillion euros. The country faces a complex debt restructuring dilemma, impacted by geopolitical factors.

Lebanon:

Lebanon has been in default since 2020, with few signs of resolution. The IMF has issued dire warnings about the country’s economic situation. Recent proposals to lift the currency peg may signal potential changes.

These countries’ debt challenges are expected to be a major focus at the G20 summit as global leaders seek solutions to support their economic stability and recovery.