Low-developing countries should choose to take on "good debt" given investment needs in their already fragile economies, according to the Director of the Strategy, Policy and Analysis Department at the International Monetary Fund (IMF).

Ceyla Pazarbasioglu considered that the main obstacles in the development of these countries have recently been the covid-19 pandemic, the war in Ukraine, and climate change. In this sense the "good debt" - which is supposed to be huge - should be for "infrastructure investments.

In addition to "good debt," it must be ensured that debts incurred by public companies and ending up as charges on the state accounts due to government guarantees, "are avoided, precisely to ensure that the amount that is needed to ensure reproductive investment in the economy is actually made available," Ceyla Pazarbasioglu added.

The official was speaking recently at a panel discussion organized by the IMF on "Strengthening Debt Sustainability.

The event, which took place in virtual format from Washington, was also attended by several economists linked to the issue of public debt, including Harvard University professor Kenneth Rogoff and the co-chair of the working group on this topic at the Bretton Woods Committee, John Lipsky.

Kenneth Rogoff recognizes the role of the private sector in the development of poor economies, but claims that the sector has been the biggest problem in the rise of public debt in recent years, all because it has no incentive to help when there is a crisis.

"There is no incentive for private parties to participate in debt restructurings when they are necessary due to a particular event or set of events that would dictate that possibility," said the academic public debt expert, referring specifically to the lack of private sector participation in the debt restructuring initiatives launched by the G20 and the Paris Club.

In a recent interview to Lusa, the director of Standard & Poor's (S&P) sovereign rating department had already warned about the impact of public debt on the development of African countries.

"Even before the pandemic we were seeing a rise in public debt, although now there are more financing options for African countries than there were 10 or 15 years ago: China, the multilaterals, the issuance of foreign currency debt securities (Eurobond), and the expansion of domestic markets, for example," Ravi Bathia listed.

With debt rising and putting pressure on public finances, the control, he said, was in the fact that growth was fairly strong in the region, but this equation was hit by covid-19, which suddenly collapsed growth in several countries, worsening debt metrics.

"The dynamics have changed and several countries have gone into 'debt distress' [debt levels that are too high], Zambia has gone into financial default, Ethiopia has joined the common framework for dealing with debt, and now we are basically seeing recovery in commodities and the services sector, but the debt issue is there and causing problems, with countries looking for solutions, such as restructuring debt or increasing market access through new Eurobonds to pay off old bond debt," he concluded.