NYTimes: As Debt Piles Up, Countries See Fiscal Relief as Political Leverage : Patricia Cohen / NYTimes

Shared by Tom McDermott

Last week we posted an article and link to the Jubilee Report: Tackling the Debt and Development Crises.  The article below ties closely to the issues discussed in the Jubilee Report, including how can countries escape from unsustainable debt traps? 

On the one hand, this is a crucial moment for debt write-offs, write-downs, and repayments because most debt is denominated in US dollars.  The dollar is now at its lowest point since 1973.  On the other hand, many of the countries, banks, and corporations which made loans remain intransigent on forgiveness, even when full repayment of loans seems less and less likely.   The article argues that for countries like China, so far reluctant to forgive debt, there are great strategic benefits to forgiveness.  A related question remains for the international banks and corporations which hold enormous quantities of debt.  

Click here for the article

Summary:
Global debt burdens on low- and middle-income countries have reached a staggering $8.8 trillion, with many nations spending more on interest than on basic services like health and education. At recent summits in Rome and the Vatican, European leaders including Italy’s Giorgia Meloni proposed limited debt relief, while calls mounted for China—the largest lender to the Global South—to step up its role. Despite its economic might, China has so far been reluctant to forgive debt, although experts argue that doing so could benefit both global development and China's own strategic interests. Meanwhile, the United States, under President Trump, continues to retreat from multilateral efforts, limiting prospects for coordinated solutions.

Quotes:

“A decision by China to offer more debt relief could be a ‘game changer for the poor and the system.’”
“It’s a smart move for China, and it’s good for the world.” — Brad Setser
“Africa is a continent where our future is at stake.” — Giorgia Meloni