External publications

Debt relief by multilateral lenders: why, how and how much?

Zucker-Marques / Ulrich Volz / Kevin P. Gallagher
External Publications (2023)

London, Boston/MA and Berlin: SOAS University of London, Boston University & Heinrich-Böll-Stiftung

Volltext/Full text

As the sovereign debt crisis in the Global South continues to unfold, the lack of involvement of multilateral development banks (MDBs) in debt relief efforts has become a contentious issue among major creditors. Although the Group of 20 (G20) has explicitly called for MDBs to develop options to share the burden of debt relief efforts, MDBs have not presented any concrete and systemic plan thus far on how to contribute to debt relief efforts to countries applying for the G20 Common Framework. This report aims to contribute to the ongoing debate over debt relief negotiations and MDBs in three main areas: First, it assesses whether there are compelling reasons for including multilateral lenders in debt relief, considering the point of view of debt-vulnerable developing countries, the efficiency of current debt relief negotiations and the sustainability of MDBs’ operational model. Second, it estimates the adequate level of relief MDBs should provide if they partake in debt restructuring. Finally, bearing in mind the importance of maintaining MDBs’ preferred creditor status and high credit ratings for a low cost of funding, it discusses policy options to cover MDBs losses. These suggestions draw on historical experiences of MDB involvement in debt relief (the Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative), as well as emerging opportunities.