April 22, 2024
World Economy

US and China cooperate on something: seeking way out of emerging country debt to avoid wave of sovereign defaults

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Norbolsa| One of the most important signs of cooperation we have seen in recent times is the ongoing talks between the US and China to find a way out of the debt of impoverished countries and avoid a wave of sovereign defaults.

The talks, which include ways to pre-emptively extend loan periods before countries default, are generally aimed at easing poor countries’ annual debt service burden of more than $400 billion ($537 billion) and finding an alternative to the high interest rates at which they are currently borrowing in the market.

In addition to extending repayment terms, other ideas being considered include increasing funding from the World Bank and other multilateral banks. A key point is to put such measures in place before countries default on their obligations and enter into formal restructuring talks with creditors.

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