Ramya Vijaya presented her research project on the links between debt and good governance. Building on her previously published articles, which she had shared with the fellows in advance, the outlines of her planned book-length project on the topic began to take shape. She began by noting that a new phase of fiscal austerity has emerged since the COVID-19 pandemic. Unlike in previous austerity cycles, however, this is no longer driven exclusively by individual international institutions or national governments, but is more deeply and broadly embedded in the global political economy.

The “austerity mindset” has become increasingly widespread and now shapes international financial and governance structures as a whole. This contributes to a gradual narrowing of states’ fiscal leeway and simultaneously alters the conception of what constitutes good governance. Against this backdrop, Ramya Vijaya argues, the debate on “good governance” must be rethought. It is no longer sufficient to focus solely on efficient administration or fiscal discipline; rather, attention must be turned to the institutions and power structures that shape the debate over fiscal policy space. This is particularly evident in the role of the major rating agencies. Although their ratings are officially intended to assess only the default risk of sovereigns, in practice they often exert an unduly restrictive influence on fiscal policy decisions. Their methodologies are frequently opaque, and they operate in an oligopolistic market with only limited democratic or regulatory oversight by the dominant “Big Three” agencies. Rating methodologies prioritize short-term fiscal consolidation in particular, thereby creating strong disincentives for long-term development strategies.

These dynamics are further exacerbated by declining multilateral financing options, the increasing power of bond markets (“bond vigilantism”), and the growing importance of sovereign credit ratings. In many countries, the current debt crisis is leading to a return of economic policy conditionalities that further restrict fiscal leeway. Overall, this development points to a profound transformation of global governance paradigms: away from a development-oriented understanding of state capacity and toward a model that prioritizes fiscal discipline, debt management, and market confidence over social development and long-term public investment. Ramya Vijaya’s forthcoming book will explore in depth the extent to which the rise of authoritarian-populist political movements is linked to the narrowing of the concept of good governance described here.