In addition to the burden of interest rates, countries under distress are also forced to comply with fiscal austerity, an important condition that the IMF attaches to most of its financial assistance.  With western economies and multilateral agencies failing to provide swift and coordinated relief, poorer nations have been increasingly looking for bailouts from private creditors. 

According to research by economists Lawrence Summers and N.K. Singh, the private sector reaped $68 billion more in interest and principal repayments than it loaned to developing economies in 2023.  Instead of providing comprehensive debt relief to struggling economies, the lenders of last resort collected $40 billion in repayments of non-concessional loans from these nations.

The sovereign debt restructuring process has become much more difficult, owing to the wide variety of creditors and much larger debt involved.  The Sri Lankan government is struggling to reach an agreement with its bondholders for restructuring of around $12 billion of debt.  It took Zambia three years after its default to agree to a debt restructuring with private bondholders.  The true extent of liabilities is often not wholly known to creditors or international institutions. 

The issue of emerging market debt distress has garnered attention for a long time, but solutions have proven elusive.  New rules announced by the IMF this week aim to speed debt restructuring by easing the requirement that nations reach a debt agreement with one or more of its bilateral creditors.

The size, scope and nature of 21^st century fiscal problems have grown, but the resources of multilateral bodies like the IMF have not progressed at the same rate.  The Biden administration is proposing to inject $21 billion to shore up the Fund’s ability to deliver financial aid.  Considering the debt and case load, other members will have to chip in.  More and more governments are living on borrowed time.