Poor countries struggling with debt fight to get help

ON THE MORNING of November 13th last year Zambia’s vice-president told parliament, “This country will not default.” Hours later the inevitable happened. Having destroyed its relationship with the IMF, struggled to provide clear data on its borrowing from China and failed to win a reprieve from bondholders, Zambia missed a deadline to pay interest and defaulted on its debt. Lenders could only shake their heads in bemusement.

For some poor countries like Zambia, a debt crisis has always been the story of a chaotic and corrupt government that has borrowed carelessly. But in the more complex creditor landscape of today, defaults can also, more than ever, be about struggling nations stuck in the web of diplomatic feuds that bind their creditors together. Each lender enters restructuring talks with the same preoccupation: is someone else getting a better deal? No one wants to be first to give concessions and there is little advantage in showing your hand. More than financial data or legal frameworks, it is these power struggles that have come to define restructuring negotiations.

The pandemic has left many countries struggling to repay their debt. As well as Zambia, five others—Argentina, Belize, Ecuador, Lebanon and Suriname—defaulted last year. For some, health-care and social spending rose just as the global economy tanked...