The new face of developing country debt

Developing country debt has been a major preoccupation for development policy makers and practitioners since the debt crisis of 1982. It is a major obstacle to economic and social progress in developing countries. After the resolution of the Asian financial crisis of the late 1990s and the debt relief initiatives for low-income countries of 1997–2006 concerns about developing country debt seem to have receded. However, there are a growing number of problems that warrant concern, including the accumulation of domestic debt, short-term debt and private non-guaranteed debt, and increasing recourse by low-income countries to international capital markets. At the same time developing countries have strengthened their capacity to oversee and analyse their debt portfolios. Nonetheless, significant weaknesses remain in debt management capacity at the national level. Moreover, the activities of ‘vulture funds’ and the lack of a sovereign debt restructuring mechanism reveal major shortcomings in the international institutional architecture that need to be addressed urgently.