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The World Bank has just warned us that a fourth debt wave could dwarf the first three.

Emerging economies, which have amassed a record debt-to-GDP ratio of 170%, are particularly vulnerable. 

As in the previous cases, the debt wave has been facilitated by low interest rates. There is reason for alarm once interest rates begin to rise and premia inevitably spike.

Kaushik Basu Project Syndicate 31 January 2020

Kaushik Basu, former Chief Economist of the World Bank and former Chief Economic Adviser to the Government of India, is Professor of Economics at Cornell University and Nonresident Senior Fellow at the Brookings Institution.

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