Emerging Economies Need New Finance, Not Moratoriums
A comprehensive debt-repayment freeze could be counterproductive for emerging economies that currently retain access to financial markets. Instead, leading central banks should establish a special-purpose vehicle that would act as a bridge between the vast amount of available global liquidity and these countries’ growing financing needs.
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BOGOTÁ – Many are calling for a temporary moratorium on all debt repayments by developing and emerging economies, in order to prevent the COVID-19 pandemic from triggering a tsunami of sovereign defaults. Rather than waiting passively until debtors stop meeting their obligations, the argument goes, creditors would be better off agreeing now to suspend repayments for a while.