The unprecedented fiscal firepower used to protect the vulnerable from the harsh socio-economic impact of the Covid-19 pandemic and the resulting economic contraction have pushed the average government debt level in the Asia-Pacific region to its highest since 2008.
Public debt distress is expected to worsen amid the global economic slowdown, record-high inflation and rising interest rates, and uncertainty induced by the war in Ukraine. And surging debt service payments are expected to put public debt sustainability of several developing Asia-Pacific economies at risk. Most concerning, debt distress risk is highest for countries with the highest development finance needs, including small island developing states.
