Opinion: Why 2025 could be a ‘Bridge year’ for the global south

Nearly five years after the height of the pandemic, unsustainable debt burdens remain an economic long-COVID symptom that many countries are still struggling to shake. As we look toward 2025, a critical opportunity has emerged for the global development community to redefine its approach to supporting these countries and build economic resilience. While the full-scale debt crisis that many feared in the wake of COVID-19 has largely been sidestepped, low- and middle-income countries are grappling with a persistent liquidity crisis that is preventing them from investing in essential services for their people — things like health care and education, which are critical to achieving their growth and development goals. Left unchecked, many of these countries could end up defaulting on their debt and facing protracted restructuring processes that could all but cement a historic reversal in development. While debt restructuring mechanisms like the Group of 20 major economies’ Common Framework can offer relief for insolvent countries that cannot meet their debt obligations without significant reductions in principal and interest payments, there currently is no mechanism for countries that are illiquid — meaning, countries that can potentially meet their obligations if they were refinanced at more reasonable rates. In response, a coalition of economists, led by the Finance for Development Lab, or FDL, and Columbia University’s Initiative for Policy Dialogue, or IPD, has championed a pioneering, yet pragmatic alternative — dubbed the “Bridge Proposal” — that could fill this gap in the debt architecture. This approach, which has struck a chord with low-income country leaders and lenders alike, could become a leading framework to address liquidity challenges facing the developing world and redefine how the international community supports countries to achieve long-term economic stability. A framework for transformation The Bridge Proposal operates through three interconnected pillars: robust and credible growth programs, scaled-up international financial support, and rescheduled debt servicing. Each of these elements is geared toward fostering economic resilience rather than simply keeping countries treading water until the next crisis. By addressing liquidity issues head-on and proactively, countries can avoid a cycle of costly defaults and the devastating toll they take on the poorest and most vulnerable populations. Here’s what the Bridge Proposal is putting forward: • Multiyear growth programs: Bridge proposes extending the traditional three-year horizon for International Monetary Fund programs to a five-year commitment that is focused on growth enhancement, working alongside the World Bank on targeted initiatives. This longer-term focus provides the necessary runway for countries to make structural improvements, while mobilizing resources in a sustainable and equitable way. • Increased multilateral support: Through a scale-up of financing from international financial institutions, or IFIs, and bilateral lenders, this pillar would leverage fresh resources from the IFIs — including the 21st replenishment of the International Development Association, financing from World Bank capital reforms, and guarantees to attract private investment and enable debt swaps — without adding unmanageable debt. • Increased creditor flows: It's crucial for creditors to continue providing financing throughout program periods to help reverse the trend where low- and middle-income countries end up sending more money out in debt payments than they receive in funding. Bilateral and private creditors could coordinate efforts through country platforms, and temporarily suspend debt payments, to ensure they are giving more than they take. Participation would likely need to be incentivized using a mix of incentives and pressure. A catalyst for global development The true power of the Bridge Proposal lies in its holistic and coordinated, multipartner approach. By encouraging debtor countries to develop comprehensive, long-term recovery programs, it gives them agency over their economic futures and avoids front-loaded austerity — such as deep budget cuts and tax hikes or both — which most often have a direct and noticeable effect on the lives of those experiencing the highest levels of poverty. At the same time, it calls on multilateral organizations and creditors to make equally ambitious commitments, thus creating a balanced, collaborative framework for growth. The Bridge Proposal’s strength is its ability to harmonize existing tools, enhancing the effectiveness of each while fostering a spirit of shared responsibility among stakeholders. 2025 offers several important opportunities to advance progress and build political consensus on aspects of the Bridge Proposal: • The first African G20 presidency, led by South Africa and supported by the African Union’s membership, is likely to focus significantly on economic growth and resilience on the continent. • A jubilee year for the Catholic Church is likely to drive progress toward addressing some of the key gaps in the debt architecture, building on the legacy of the Jubilee 2000 campaign, which sparked a global movement for debt relief and contributed to the launch of the Heavily Indebted Poor Countries, or HIPC, initiative. • The fourth International Conference on Financing for Development will set the agenda for the development finance system for the next several years, and could be where we see broad agreement on reforms that center growth and resilience in Africa. While the Bridge Proposal represents a new paradigm in development finance, it does not cover all countries. But there is hope that these processes will also result in improvements to the effectiveness of the Common Framework and other aspects of the debt architecture. It is not merely a financial lifeline but a roadmap for financial sovereignty and resilience. And while a coordinated effort on this scale will not be without challenges, if the international community embraces the Bridge Proposal as the consensus framework for promoting debt sustainability in 2025, it could mark a shift from reactive crisis management to a proactive strategy aimed at genuine economic empowerment. As debt vulnerabilities continue to deepen and increasingly resemble those that spurred a global movement for debt relief nearly 25 years ago, the question for us is whether we could do better this time by acting preemptively and preventing a lost decade that would further set back hard-won development gains.