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1/ Private lenders have been telling borrowing governments you need to keep paying your debt and interest in full during the crisis, to be able to borrow in the future. This is in their vested interest, but wrong – according to the IMF (THREAD)
2/ For a country with high debts, if it restructures the debt now it will be able to borrow at lower interest rates in the future because it will have a lower debt burden. A country which struggles on with high debts will keep paying high rates
3/ This is what the IMF found in a 2013 paper: “debt restructurings have often been too little and too late, thus failing to re-establish debt sustainability and market access in a durable way”. https://www.imf.org/en/Publications/Policy-Papers/Issues/2016/12/31/Sovereign-Debt-Restructuring-Recent-Developments-and-Implications-for-the-Fund-s-Legal-and-PP4772
4/ More fundamentally, loans in foreign currency at high interest rates are not a useful form of development finance. The high interest takes a lot of money away from governments, so they need to be really well invested to be worth it.
5/ Research by the IMF in February this year found that countries borrowing from international private lenders have higher debt payments, no increase in growth and greater economic vulnerability:
6/ “Access to international [debt] markets has often coincided with worsening debt dynamics and greater vulnerabilities … [for] 20 countries that accessed international bond markets for the first time after 2005, [their] debt service to revenue ratios rose consistently…
7/ … "This is to be expected but growth rates in the five years afterwards have typically not picked up, contributing to weaker internal debt dynamics.” https://www.imf.org/en/Publications/Policy-Papers/Issues/2020/02/05/The-Evolution-of-Public-Debt-Vulnerabilities-In-Lower-Income-Economies-49018 #CancelTheDebt / ENDS
