Policy Actions for Alleviating Debt Distress and Debt Sustainability Risks in the Global South


A higher debt burden combined with a fragile growth outlook has amplified debt sustainability risks in low- and middle-income developing economies. These risks are exacerbated by the effect of climate risk vulnerability on the cost of sovereign borrowing. Set against the context of global debt crisis concerns, driven by debt distress exposures and default risks in the Global South, this policy brief proposes actions for the Group of Seven (G7) to address these challenges. This includes proposals on: (i) special drawing right (SDR) allocations and enhancing the operational efficiency of SDR disbursements, (ii) reform of the Group of Twenty (G20) Common Framework; (iii) a new Comprehensive Debt Relief Initiative; (iv) progress on incorporating climate risk exposures in debt sustainability assessments by the International Monetary Fund and the World Bank; (v) mechanisms to bolster resilience to external debt vulnerabilities; and (vi) enhancing the Sustainable Development Finance Policy in multilateral development banks.

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