Low-Income Nations Face Debt Restructuring as US Treasury Warns of Distress

US Treasury Secretary Scott Bessent has warned that several low-income nations may need to restructure their sovereign debt. According to Bessent, a revised Debt Sustainability Framework is necessary to assess whether a country's debt load is manageable.

The current framework has been criticized for moving at a slow pace, with only a handful of countries completing the process since its inception in 2020. The US Treasury's position emphasizes the need for greater transparency among creditors and a more equitable distribution of losses when restructuring occurs.

Bessent's warning comes as 69 low-income countries have been identified as at risk of debt distress, with over half categorized as either high risk or already in distress. These countries took on significant debt during the low-interest-rate era of the 2010s and were further hit by COVID-related revenue collapses and rising food and energy prices.