From the weekend until today, G7 leaders have gathered in Germany to discuss a litany of overlapping global crises, including the war in Ukraine, food insecurity, inflation, backlogged global supply chains, the pandemic response and climate change. These challenges have a common denominator: All are falling hardest on low- and middle-income countries that are already facing an escalating debt crisis.
When Covid-19 arrived 2.5 years ago, nearly 60% of the poorest countries were already in or at high risk of debt distress. Since then, the pandemic has pushed this cohort's total indebtedness to a 50-year high, leaving more than 24 countries at risk of defaulting this year.
Most of these countries are still struggling to recover from the pandemic, and now a tsunami of negative shocks is threatening their prospects further. On top of soaring prices for staples like energy, wheat and fertiliser, interest-rate hikes in the United States and other major economies are driving up borrowing costs globally.
