The growing developing country debt burden and the special role of China

As COVID-19 continues to interrupt economic activities, induce higher public spending and decrease tax revenues, sovereign debt issues in emerging countries are worsening. The World Bank has noted that the debt burden of low-income countries rose 12 per cent to a record US$860 billion in 2020.

Authors: Mengdi Yue and Christoph Nedopil, Fudan University

The International Monetary Fund (IMF) sounded alarm bells in December 2021, warning that 60 per cent of low-income countries are at high risk or already in debt distress, up from 30 per cent in 2015.

Analysis from a Green Finance & Development Center report published in March 2022 shows that outstanding public external debt in most countries eligible for the DSSI has increased from 2019 to 2020. But some countries did decrease debt levels, such as the Republic of Congo and Mozambique.

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