The COVID-19 crisis built up indebtedness and increased external financing needs in low-income countries
Karjanlahti, Kristiina; Tiililä, Nea (16.11.2021)
JulkaisusarjaBank of Finland Bulletin. Analysis
JulkaisijaBank of Finland
Julkaisun pysyvä osoite onhttps://urn.fi/URN:NBN:fi:bof-202112102147
The shock of the COVID-19 pandemic and the associated deterioration in the economic outlook has exacerbated solvency concerns and increased the risks of debt restructurings in low-income countries (LICs). Financing conditions for many LICs still remain tight while the external financing needs are increasing. The International Monetary Fund (IMF) estimates that LICs would need a total of $450 billion in investments in the medium-term to respond the COVID-19 crisis and to accelerate growth to reach the pre-pandemic convergence path with advanced economies. How to fill the vast financing gap in LICs is a central on-going discussion in the international fora. A solution will require a combination of international and domestic measures to increase the availability of external financing, enhance domestic revenue mobilization and address debt sustainability issues.
The accessible version: https://www.bofbulletin.fi/en/2021/articles/the-covid-19-crisis-built-up-indebtedness-and-increased-external-financing-needs-in-low-income-countries/