(May 11): As the Covid-19 virus spreads globally, economic paralysis and unemployment follow in its wake. But the economic fallout of the pandemic in most emerging and developing economies is likely to be far worse than anything we have seen in China, Europe, or the United States. This is no time to expect them to meet their debt payments, either to private or official creditors.

With inadequate healthcare systems, limited capacity to deliver fiscal or monetary stimulus, and underdeveloped (or non-existent) social safety nets, the emerging and developing world is on the cusp not only of a humanitarian crisis, but also of the most serious financial crisis since at least the 1930s. Capital has been stampeding out of most of these economies over the past few weeks, and a wave of new sovereign defaults appears inevitable.

We have been consistently arguing the urgent need for a temporary moratorium on all debt repayment by any but the most creditworthy developing or emerging sovereign debtors. The case for a moratorium for distressed sovereign borrowers has many similarities to that for households, small businesses, and municipalities.

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