CGD Policy Blogs

 

Providing New Financing to Low-Income Countries with High Levels of Debt: Some Considerations

Low-income countries with high levels of debt face a dilemma when considering new financing. Additional funding is needed to meet key development objectives, but too much new financing in the form of debt can exacerbate debt problems. Countries that borrow too much – even on concessional IDA terms – can quickly find themselves facing rapidly rising debt ratios that could threaten debt sustainability in the future.