The debt crisis risk that has overshadowed the global economy for four years is beginning to recede, the Paris Club of rich creditor nations said in its 2023 annual report on Wednesday.

A string of defaults, from Zambia to Sri Lanka, began in 2020 when the Covid-19 pandemic triggered a series of economic shocks that continued into last year with the fallout from Russia's war in Ukraine and rising global interest rates compounding pressure on fragile finances in many poor nations.

Now, the group said the tide is shifting, even as debt restructuring talks loom in countries such as Ukraine and deadly protests erupt in Kenya over tax rises aimed at reigning in government debt.

"The spectre of another major debt crisis is slowly receding," the group said in a report released on the sidelines of its annual meeting in Paris.

"But vigilance remains the order of the day – at a time when many borrowers have significant external repayments falling due, limited fiscal space and large investment needs."

The Paris Club, made of 22 official creditor nations, said the return of Sub-Saharan African countries to Eurobond markets this year, a stabilization in low-income country debt levels and a potential peak in global interest rates gave cause of optimism.

However, several concerns lurk between the lines of the report, including over whether the mechanism used to coordinate debt talks for the world's poorest countries - dubbed the Common Framework - is fit for purpose.

Global ratings agency S&P, in a contribution to the report, also flags concerns over the very African Eurobond debt issuance that the Paris Club points to as a reason for optimism.

S&P's Roberto Sifon Arevalo said countries worldwide are expected to issue a "concerning level" of debt close to $11.5 trillion.

Ukraine, whose financial fate remains precarious after its proposed debt restructuring hit the rocks earlier this month, is mentioned only in a table of the report's 99 pages. The country was not on the agenda for meeting, a Paris Club official said.

The report also touches on the Paris Club's efforts to make debt talks more transparent - including through its 2023 data-sharing initiative with the World Bank that it said allows the Bank to conduct large-scale reconciliation exercises.

But the World Bank's Manuela Francisco also warned that blurring lines between creditor groups - with more state-controlled lenders charging interest rates above 5% to low-income nations - continued to stress their finances.

China, which has become the largest bilateral lender to a string of low-income nations, has a complicated web of lending via state-controlled entities that the world has struggled to unpick.

Xuan Changneng, deputy governor of People's Bank of China, did not renew Beijing's request that multilateral lenders take losses on their debt, but did urge them to provide more grants and lending with a "deeper level of concessionality."

"They need to show more efforts to help countries in debt distress," he wrote.

The report also said talks were ongoing between Ethiopia and the International Monetary Fund. Official creditors suspended Ethiopia's debt repayments until it reached a deal for a Fund program.

"The Secretariat is hopeful that Ethiopia and the IMF will be able to come to agreement on the terms of a programme over the course of 2024."