A Plan to Address the COVID-19 Debt Crises in Poor Countries and Build a Better Sovereign Debt System

Swift and orderly action on international debt is a moral, political, economic, and security imperative for the United States. A series of disorderly and protracted debt crises would be catastrophic for the world’s poorest countries. The Center for Global Development proposes these three key recommendations for the Biden Administration:

• Expand liquidity and fiscal space for poor countries. The Biden administration should take immediate action to avert defaults in low-income countries through large and immediate provisions of liquidity and measures to help countries manage rollover risk on sovereign bonds.
• Expand official bilateral debt relief to poor countries. The administration should work with the international financial institutions, China, and the Paris Club to implement guiding principles for a COVID-19 common framework for debt treatment.
• Reform the sovereign debt system. The Treasury Department should lay the groundwork for a series of updates to the international financial sovereign debt restructuring architecture.