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Global Development Workshop 19, Lu Feng: Understanding the New Round of Global Sovereign Debt Risk from an Economic Perspective

  Professor Lu Feng, National School of Development, Peking University

  The focus of today's lecture is on the topic of sovereign debt risk and its impact on the economy, which has become a pressing issue for policymakers and stakeholders across various countries. While pursuing economic development, borrowing from external sources is often necessary for investment in domestic construction and economic growth. However, excessive borrowing can lead to unsustainable debt burden, which may pose default risks and crisis. Effectively managing sovereign debt and striking a balance between borrowing and development is a complex and challenging undertaking. During this lecture, we will discuss the current global research data and sovereign debt situation using empirical data, as well as introduce a theoretical perspective on this subject from a macroeconomic viewpoint. The lecture will also delve into understanding the state of rising global debt risk and international cooperation in coping with it.

  As the world faces the repercussions of a new wave of sovereign debt crises, the international community has become aware of the importance and urgency of comprehensively addressing rising debt risks, including multilateral governance. During the recent spring meetings of the International Monetary Fund and the World Bank, member countries discussed this crisis as the primary topic. The meeting highlighted the significance of international cooperation in effectively managing, mitigating, and ultimately resolving debt crises in countries such as Sri Lanka and Ghana. It also focused on the multilateral development banks and the International Development Association's positive role in alleviating the distressed countries' debt crisis and accelerating debt treatment and restructuring processes through financial support, policy concessions, and ex-ante debt relief. Certain aspects of these efforts are consistent with China's previous advocacy for global cooperation in debt reduction, indicating that the international community has made constructive progress in prudently addressing sovereign debt risks.

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