What Has Been the Impact of COVID-19 on Debt ? Turning a Wave into a Tsunami

Ayhan Kose, Peter Nagle, Franziska Ohnsorge and Naotaka Sugawara

No 9871, Policy Research Working Paper Series from The World Bank

Abstract: This paper presents a comprehensive analysis of the impact of COVID-19 on debt, puts recent debt developments and prospects in historical context, and analyzes new policy challenges associated with debt resolution. The paper reports three main results. First, even before the pandemic, a rapid buildup of debt in emerging market and developing economies—dubbed the “fourth wave” of debt—had been underway. Because of the sharp increase in debt during the pandemic-induced global recession of 2020, the fourth wave of debt has turned into a tsunami and become even more dangerous. Second, five years after past global recessions, global government debt continued to increase. In light of this historical record, and given large financing gaps and significant investment needs in many countries, debt levels will likely continue to rise in the near future. Third, debt resolution has become more complicated because of a highly fragmented creditor base, a lack of transparency in debt reporting, and a legacy stock of government debt without collective action clauses. National policy makers and the global community need to act rapidly and forcefully ensure that the fourth wave does not end with a string of debt crises in emerging market and developing economies as earlier debt waves did.

Keywords: Financial Sector Policy; External Debt; Debt Markets; Debt Relief and HIPC; Public Sector Administrative & Civil Service Reform; Economics and Finance of Public Institution Development; De Facto Governments; State Owned Enterprise Reform; Public Sector Administrative and Civil Service Reform; Democratic Government; Private Sector Economics (search for similar items in EconPapers)
Date: 2021-11-30
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://documents.worldbank.org/curated/en/80199163 ... e-into-a-Tsunami.pdf (application/pdf)

Related works:
Working Paper: What Has Been the Impact of COVID-19 on Debt? Turning a Wave into a Tsunami (2021)
Working Paper: What has been the impact of COVID-19 on debt? Turning a wave into a tsunami (2021)
Working Paper: What Has Been the Impact of COVID-19 on Debt? Turning a Wave into a Tsunami (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:9871

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().