Why Are Developing Countries Heavily Indebted, Again

Ishac Diwan and Marin Ferry

No 2505, FDL Policy Notes from CEPREMAP

Abstract: Do poor countries systematically over-borrow, leading to cyclical debt crises, or are the current debt difficulties caused by unusually large external shocks? To answer this question, the paper focuses on the debt situation in 2019, before a series of negative shocks started hitting developing countries. The authors dispute the cynical view that for poor countries, debt crisis is destiny. They show that in the recent period, there is a much greater heterogeneity of cases that suggested by this deterministic pessimism. The findings suggest that while some countries’ current debt difficulties mirror past patterns, others face challenges that are distinct and influenced by external shocks.

Keywords: external debt; debt distress; HIPIC; terms of trade shock; investment and growth (search for similar items in EconPapers)
Pages: 36 pages
Date: 2025-03
New Economics Papers: this item is included in nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:cpm:notfdl:2505

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