When push came to shove: COVID-19 and debt crises in low-income countries

Abstract

ABSTRACT The pandemic brought to the fore the long-standing weaknesses of resolving countries’ debt repayment difficulties. This article examines the response by the G20 and the IMF in the first six months of the pandemic focusing on low-income countries. This article maps the proposals and current debate motivated by the pandemic and argues that a critical element of the dysfunctional architecture that deserves more attention is Debt Sustainability Analysis (DSA). The article analyses the characteristics of IMF loans to DSSI eligible countries, and scrutinises the IMF’s loan approval basis. The article finds that programmes were approved on the basis of sharp “V” shaped recovery and re-establishment of fiscal austerity after transitory deficit spending. As a consequence of the problems in international sovereign debt architecture, the IMF and G20 have provided piecemeal policies to address the unfolding crisis. The article suggests the problem of DSA is symptomatic of its fraught origin and concludes that along with existing proposals to improve sovereign debt architecture, the alternatives for a more suitable economic analysis ought to be revisited.