The COVID-19 pandemic has increased low- and middle-income countries’ debt levels to a 50-year high. With soaring inflation, rising interest rates and the strengthening U.S. dollar compounding their debt-service burdens, a crisis is now unfolding in several countries of the developing world.
The Economist has identified 53 vulnerable countries that have either defaulted on their debts or are at high risk of debt distress. While it is true that most of these countries are among the world’s poorest, a growing number of middle-income economies are also facing severe debt problems. According to the World Bank, nearly 60% of all emerging and developing countries have become high-risk debtors.
To gauge the full scope of this crisis and identify possible solutions, we must first consider these economies’ key characteristics and their public sector liabilities. The 53 debt-distressed countries that The Economist identified represent 18% of the world’s population — more than 1.4 billion people — but just 5% of global GDP.