Global Sovereign Debt Roundtable 5th Cochairs Progress Report

Overview & Synopsis

Debt vulnerabilities remain elevated, particularly in low-income countries, necessitating continued coordinated efforts. The overall assessment remains unchanged from April. While, on average, debt levels in low-income countries (LICs) and emerging markets (EMs) have stabilized and are expected to remain stable or decline slightly over the medium term for both LICs and EMs, they remain higher than they were before the COVID-19 pandemic, with a few countries being particularly vulnerable. In addition, many countries, particularly those in the LIC category, face significant debt-service challenges. While their debt is sustainable, high interest costs and/or refinancing need crowd out the space available for development spending, such as education, health, and infrastructure investment. Recent shifts in global policies and cuts in foreign aid exacerbate the challenges, placing an additional premium on domestic reforms to enhance growth, foster resilience, mobilize resources, improve transparency, and strengthen debtor-investor relations. Specific attention to rising domestic debt vulnerabilities is warranted. This calls for further progress on: further improving restructuring processes, including under the Common Framework, to ensure countries with unsustainable debt have access to timely and adequate debt treatments. Stepping up support for countries with sustainable debt but high debt-service challenges. The IMF–World Bank three-pillar approach provides the conceptual framework for that support. Building resilience and preventing unsustainable build-up of debt. This requires accelerating progress on debt transparency, debt management, and debtor and investor relations.