The CSIS Project on Prosperity and Development hosted the eighth Global Development Forum in Washington D.C. on April 18, 2024. This forum focused broadly on economic growth, decarbonization, and pressing challenges and opportunities for development.
This panel addressed unsustainable debt levels among some of the world's poorest countries, notably in Africa, and the often-overlooked risk to USAID funding in debt crises. While debt crises are not new, the Global South is experiencing a debt crisis unseen in this century. Many developing countries are facing a crushing debt burden exasperated by the COVID-19 pandemic, the climate crisis, rising interest rates and worries over a slowing economy, and the ongoing war in Ukraine. Developing countries are increasingly borrowing from China, hedge funds, and an atomized universe of private sector investors. The debt crisis impedes global development as countries have to choose between interest rates instead of funding education and health care systems. This new debt lacks transparency and is unable to be coherently and quickly restructured. Risk emerges when the IMF or similar entities require bolstering central bank reserves with "non-debt creating flows,” often a pre-condition for assistance. This not only compromises the intended impact of USAID grants, aimed at supporting the neediest during crises, but also raises concerns about the effective use of American taxpayer funds, which ultimately puts aid budgets at risk. Solving this debt problem is going to involve a different set of stakeholders and could require a political solution.
