The burden of Global Debt uncovered
What is the cost of a system that does not effectively allow developing nations to manage their debt? When should a country incur debt, and what should we do to minimise default risk and promote long-term sustainability of sovereign debt borrowings?
The causes and consequences of debt accumulation issues on a national scale are expertly examined in this new paper from the Queen Mary Global Policy Institute and The Institute for Global Law, Economics, and Finance.
The report’s authors Professor Rodrigo Olivares-Caminal (Centre for Commercial Law Studies, Queen Mary University of London) and Professor Paola Subacchi (Chair of the Queen Mary Global Policy Institute Advisory Board, Queen Mary University of London) collaborated to draw a set of guidelines (the “Guide”) to assist countries in implementing good practices for responsible and transparent borrowing in order to prevent unnecessary or over-indebtedness.
Why debt management matters
“The unprecedented level and speed of debt build-up driven by the financing needs of the Covid-19 crisis has increased the risk of debt distress and the odds of a new debt crisis cycle”
“The Debt Burden: How to create a Better Debt Burden Framework” reviews the importance of debt management as a preventative measure, demonstrating how initiatives can be put in place to address the root issues around global debt, and the resulting scenarios that follow as a result.
Clarity provides a route to effective frameworks
To be effective, transparency and debt management must be combined with accountability. This is a two-way road. Debt transparency and debt management is complex, requiring stakeholders to work together for the same objective.
By examining the debt frameworks of over 30 countries, the report highlights how a lack of transparency has hindered accurate debt sustainability assessments and investment analysis.
The report signals that policy lessons learned from nation-states are critical learning points for the wider international community and it is only by effectively capturing the forces at work that causes these issues, that future initiatives can be improved upon in a progressive manner.
Shifting the focus to keep debt levels sustainable
To be effective, transparency and debt management must be combined with accountability. This is a two-way road. Debt transparency and debt management is complex, requiring stakeholders to work together for the same objective.
It is therefore clear that we need to shift focus before debt accumulation reaches unsustainable levels – and not after. The focus should be driven by the preventative measures discussed in the paper: transparency, debt management, and accountability.