Chronicles of Debt Crises Foretold

Abstract

The debt crises looming in developing countries are being exacerbated by changing debt composition. Declining net foreign exchange earnings have worsened their predicament. As concessional development finance declined, many governments turned to riskier forms of borrowing from international capital markets. Concerted interest rate hikes are supposed to stem inflation; however, given that prices have mainly risen due to supply chain disruptions caused by war, sanctions and pandemic, interest rate increases are likely to trigger more debt crises, much worse than before. Current discourses, for example about China's ‘debt trap’ diplomacy, distract from urgently needed international and national measures to avert the looming debt crises.