Doubting debt suspension: Colombia’s former finance minister on why suspending repayments could be a mistake

Doubting debt suspension: Colombia’s former finance minister on why suspending repayments could be a mistake

But although a comprehensive debt-repayment freeze could help many low-income countries that lack a better option, it could be counterproductive for emerging economies that currently retain access to financial markets.. Countries that participate in a repayment standstill will face legal action by some bondholders, compromising their future access to capital markets.. While a debt moratorium would do emerging markets more harm than good, it would be unrealistic to expect private capital to provide the financing that these countries now require.. The business-as-usual response would be for emerging economies to seek additional support from the International Monetary Fund and the multilateral (and regional) development banks (MDBs).. The solution lies with the central banks that issue reserve currencies and which should be genuinely concerned about the health of the global economy.. In coordination with the IMF and the MDBs, they should establish a special-purpose vehicle (SPV) that would act as a bridge between the vast amount of currently available global liquidity and emerging economies' growing financing needs.. The SPV would issue bonds, which leading central banks would purchase under their own quantitative-easing (QE) programs, and then lend the proceeds to emerging economies.. MDBs should use their own balance sheets more effectively to