Business Standard

Democratising debt

Emerging economies must take stronger action to address risk mispricing, a problem at the heart of financing economic transformation

developing nations, developed economies, countries
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Illustration by Binay Sinha

Rathin Roy
The contemporary problem of financing economic transformation is simple. Rich, ageing populations in developed countries should be investing in poor countries that have a young workforce capable of generating higher returns to capital. If markets work, finance should flow from rich countries to poor countries.

This does not happen. The rich view poor geographies as “risky” places to do business. Hence, the international financial architecture imposes “sector” and “country” limits on such financial flows. Per capita income of a country has the largest weight in a country’s risk rating — the poorer you are, the less money you get. At the
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First Published: Jun 22 2023 | 9:45 PM IST

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