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Rise in sovereign debt distress in emerging markets has been red alarm and particularly poor nations around the world are battling a large build-up in debt resulting from lower economic growth and higher budget deficits as the coronavirus crisis tightened its grip.

It’s an emergency to have greater transparency around sovereign debt and achieve equitable burden sharing among all creditors, namely official, bilateral and private sector and how to engage private sector creditors in any debt relief schemes, as well as analysing options for state-contingent financing, which link a country’s debt service payments to its capacity to pay.

Include enlisting rating agencies to take disclosure and transparency into account in rating sovereign credit is need of the hour andEncourage greater participation from the private sector in debt restructuring processes, exchanging the debt of distressed sovereign borrowers for new bonds linked to the United Nations Sustainable Development Goals.

Last year, the International Monetary Fund and the World Bank launched the Debt Service Suspension Initiative (DSSI) and its accompanying Common Framework to help low-income borrowers.Countries using the G20’s Debt Service Suspension Initiative (DSSI) are due to pay bondholders just over $6 billion and other commercial lenders $6.5 billion this year, according to the European Network on Debt and Development (Eurodad).

One of the major hurdle, as many government fears that private sector debt relief will trigger a default in the eyes of credit-ratings agencies. Road ahead is tough but it has to be addressed with consensus of Government, agencies world bank and IMF.

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