Developing countries are benefiting from debt suspension

A new study by Valentin Lang (University of Mannheim), David Mihalyi (Kiel University) and Andrea Presbitero (International Monetary Fund) shows that creditors can help heavily indebted countries manage crises by allowing them to defer debt repayments.

A new debt crisis is about to hit the Global South. The pandemic and rising prices for raw materials and food are a heavy burden for many developing countries. Can creditors help these countries by providing debt relief? A new study shows that the debt suspension, granted to many developing countries at the beginning of the pandemic, have, in fact, helped them. Countries that were allowed to repay their debt at a later point in time benefited from a higher credit rating and thus from lower interest rates at the international capital market.

Press release