Covid-19 Crisis Set to Push Poorest Nations Into Debt Distress, Paris Club Warns

The economic fallout from the Covid-19 crisis is likely to tip several of the world’s poorest countries into debt distress, forcing official creditors and private-sector lenders to accept a reduction or restructuring of loan repayments, the Paris Club group of creditor countries said on Tuesday, the Financial Times reported. Any such move would go beyond the scope of the current debt service suspension initiative (DSSI) by the G20 group of wealthy nations, including Paris Club members, under which 42 out of 73 eligible countries have applied for a moratorium on repayments of government-to-government debts this year. So far, no country has publicly applied for similar treatment from private-sector creditors, although the DSSI encourages them to do so on a voluntary basis. Several countries including Pakistan, Benin and Rwanda have expressed concern that asking banks and bondholders for relief would reduce their ability to borrow on commercial markets. Read more