How Can a World Recovery Fund Relieve Developing Countries from Debt Having Piled Up in the COVID Aftermath?

Against the backdrop of tightening global financing conditions in 2022, emerging and developing countries need to swiftly address a two-pronged policy objective: sovereign debt sustainability and being able to fund investment, especially investment with high economic and social returns. With the G20 Debt Service Suspension Initiative (DSSI) ended in 2021 and the skepticism about the readiness of the Common Framework for Debt Treatment, additional and holistic solutions need to be developed. Otherwise, not only will a handful of low-income countries face liquidity constraints or even solvency challenges, but such circumstances could also quickly extend to middle-income countries. This is even more likely if the cost of funding were to shoot up amid looming concerns about a taper tantrum 2.0. Besides problems with new financing, solidarity and continuous efforts are needed from different creditors – multilateral institutions, public sector and private sector creditors – to deal with the legacy of the high stock of debt accumulated