Private-debt risks are hiding in plain sight

Carmen M Reinhart and Leora Klapper

WASHINGTON, DC – When Russian tanks rolled into Ukraine, private-debt crises were probably already brewing – albeit hidden from view – in many parts of the world, as a result of the economic disruptions caused by the Covid-19 pandemic. Now, the war is pushing even more countries toward similar crises.

The pandemic recovery has always been uneven. According to analysis based on the International Monetary Fund’s most recent World Economic Outlook, per capita income hit a new high in almost 37 per cent of advanced economies in 2021. That share drops to about 27 per cent in middle-income countries and under 21 per cent in low-income countries. And these disparities may be about to deepen.