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The Debt Question Today

The Summit for a New Global Financing Pact in Paris this month certainly cannot be accused of lacking ambition. But a new global effort to increase developing countries' fiscal space can succeed only if it embraces the spirit of innovation and adapts the latest thinking from those who have long studied – and managed – the problem.

LONDON – Like death and taxes, debt is an unavoidable feature of human life. Unlike those two certainties, however, unbearable debt burdens occasionally are relieved – or even eliminated.

Whether the motive is moral, religious, or simply financial, those campaigning for the cancellation of poor countries’ debts have sometimes succeeded. Recall the Jubilee 2000 movement, which took its name from the biblical precept of offering periodic debt forgiveness. The “positive-sum” case for wiping the slate clean – namely, that it ultimately benefits creditors and debtors alike – is a throughline from ancient religious traditions to modern-day debt-relief efforts, including those being discussed at the Summit for a New Global Financing Pact in Paris this month.

But the Paris summit’s goals extend well beyond addressing the latest resurgence of debt distress among poor countries. As French President Emmanuel Macron put it when he announced the gathering at the COP27 Climate Change Conference last November, those assembled will consider “all the means and ways of increasing financial solidarity with the South.” Hence, a top priority is to boost the capacity of the World Bank and the other (regional) multilateral development banks.