COVID-19 and the Impact on Debt: Policy Implications

Given the outbreak of COVID-19, the economic crisis that has unfurled globally is a matter of grave concern. This paper — by using a survival analysis model — argues that countries that are suffering through debt would fall into a recessionary spiral if their debt obligations are not restructured or alleviated to incorporate the unprecedented impacts of the pandemic. We provide examples of cases where such restructuring has worked. We argue not to revert to the norm of incurring further debt to pay-off older debt. Rather, the case is made to use deficit spending to mitigate the economic crisis and also prepare governments for potential climate disasters by funding green fiscal policy.