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What can be done about the unfolding sovereign debt crisis? 🎧

An expert on the politics of sovereign debt, Layna Mosley, takes a closer look at the current global debt crisis – check out our latest podcast episode.

- February 8, 2024

The World Bank estimates that around half of low-income and middle-income countries are at high risk of debt distress or already in it. In the 2010s, developing economies had relatively easy access to credit from private lenders, China, and the traditional lenders, such as the World Bank, the International Monetary Fund (IMF), and wealthy countries. 

Higher interest rates now mean that the cost of servicing these debts has soared. This means that countries like Argentina, Egypt, Ethiopia, Ghana, and Pakistan are facing difficult choices. Should they cut spending, which may increase poverty and create social unrest? Should they default on their debts, which will make it harder to access credit markets in the future? Should they accept a bailout from the IMF, which often comes with strings attached? Or can they renegotiate terms with their creditors?

I spoke about these issues with Princeton professor Layna Mosley, who runs the Princeton Sovereign Finance Lab and has published extensively on the politics of sovereign debt. Together with Peter Rosendorff, she wrote a concise introduction to the unfolding sovereign debt crisis in Current History.

We discussed what’s happening, why it is happening now, what can be done about the debt crisis – and what the consequences are for countries and the people living in them.