Categories
Blog

THE DEBT-CLIMATE NEXUS

DRGR Project Co-Chairs María Fernanda Espinosa, Ulrich Volz and Yuefen Li comment on the tightened monetary policy of central banks, taking dozens of climate-vulnerable, highly-indebted countries to the edge of a financial abyss. In an Op-Ed published on “Project Syndicate”, they stress that the international community must provide immediate debt relief in exchange for green investments to address the confluence of economic and environmental disasters ravaging the Global South.

November was a busy month of climate-change politicking. As policymakers tried to make progress at the United Nations Climate Change Conference (COP27) in Sharm El-Sheikh, Egypt, world leaders convened in Bali, Indonesia, for the G20 summit. While neither summit focused on the confluence of environmental and debt crises currently ravaging much of the Global South, both achieved some progress toward providing developing countries with the financial support they need to weather the current storm.

In Bali, the leaders of the world’s biggest economies mostly reiterated their previous positions on the debt crisis, with only minor adjustments. But at COP27, smaller countries were able to make their voices heard and underscore the need for international action on debt relief. Barbadian Prime Minister Mia Mottley, for example, pleaded with the international community to assist climate-vulnerable countries. Her “Bridgetown Agenda” proposes a three-step plan to address the developing world’s crisis, including emergency liquidity injections by the International Monetary Fund, enhanced lending by multilateral development banks and new financing mechanisms.

Categories
Blog

V20 Debt Review: An Account of Debt in the Vulnerable Group of Twenty

Emerging markets and developing countries (EMDCs) face multiple crises at the same time: while still contending  with  the COVID-19 pandemic, they are also affected by the ramifications of  Russia’s  war in Ukraine. Even prior to this, however, a debt crises loomed in the Global South.

The Vulnerable Group of 20 (V20)  is an initiative  of 55 climate vulnerable developing countries, and they are at the epicenter of the climate and debt crises  which threaten their ability to mobilize the necessary resources to build resilient and low-carbon economies.

Prior to the 2021 United Nations Climate Conference in Glasgow (COP26), the finance ministers of V20  countries released a statement calling for a global debt restructuring scheme that would link debt relief to climate and development goals.

In partnership with the V20, the Boston University Global Development published a  new policy brief by Luma Ramos, Rishikesh R. Bhandary, Kevin P. Gallagher and Rebecca Ray that provides a detailed look on the scale, composition and distribution of the V20’s debt profile.

Categories
Blog

No Time for Lost Decade

A Call by DRGR Co-author Kevin P. Gallagher, Boston University

Fallout from the COVID-19 pandemic and Russia’s war in Ukraine will require large scale sovereign debt restructuring to prevent another lost decade of development for many emerging markets and developing countries; during the same ten years they urgently need to mobilize trillions of dollars to combat and adapt to climate change.

Just before the Russian invasion of Ukraine, the World Bank sounded the alarm that fiscal and monetary tightening in the advanced economies could lead to another sudden stop in capital flows to emerging markets and developing countries, followed by capital flight, exchange rate depreciation, and debt crises.

War only makes matters worse, as many emerging market and developing countries will suffer from skyrocketing oil, gas, and grain prices. Worse still, a default on Russia’s or Ukraine’s bonds could amplify that same cycle of depreciation and crisis.

Categories
Blog

Provide Debt Relief for a Green and Inclusive Recovery

SOAS ICOP Policy Briefing and Podcast by DRGR-author Ulrich Volz

In line with recommendations for a green and inclusive recovery developed by an international team of economists, DRGR-author Ulrich Volz, Director of the Centre for Sustainable Finance at SOAS, urges the UK government, host of COP26, to propose urgently needed steps. Read more in the SOAS ICOP Policy Briefing or listen to the related 5-minute podcast.

Many developing countries, including Small Island Developing States, are suffering a triple crisis: debt, Covid-19, and climate change. UNDP estimates that close to US$1.1 trillion is due in debt service payments from developing and emerging countries in 2021 alone, and that 72 countries are at risk of external debt distress this year. Servicing this high debt undermines their ability to invest in climate adaptation despite an urgent need to scale-up investment in climate resilience.

There is a danger that vulnerable developing countries will enter a vicious circle: greater climate vulnerability raises the cost of debt, which further diminishes the fiscal space for investment in climate resilience, which further increases climate vulnerability and debt.

Categories
Blog

V20 issues Statement on Debt Restructuring

V20 Statement on Debt Restructuring Option for Climate-Vulnerable Nations
STATEMENT BY THE V20 PRESIDENCY

The V20 Group are the finance ministers of the Climate Vulnerable Forum (CVF). The CVF encompasses 48 countries with 1.2bn people. Ahead of COP26, the V20 has issued a statement on Debt Restructuring that draws upon the proposal “Debt Relief for a Green and Inclusive Recovery (see our 3-minute video for a quick explanation).

Categories
Blog

UN General Assembly 2021: Debt Highlights

As part of Eurodad’s advocacy efforts, the civil society network followed the interventions of heads of state with a focus on debt and climate issues at the United Nations General Assembly (UNGA) of 2021. We share below a list with links to the relevant speeches on these issues that Eurodad assembled from watching the debates at UNGA.

This year’s General Assembly was marked by the growing number of calls for reform of the international financial architecture. Adoption of measures such as the establishment of a debt workout mechanism, improved debt restructuring processes, immediate debt cancellation and relief, as well as the need to recognize and act on the increasingly important linkages between debt and climate were present throughout speeches and declarations made by leaders of developing countries.

Categories
Blog

10-Minute Explainer Video

Debt Relief & The Poorest Countries With Stephany Griffith-Jones

The World Bank and IMF are likely to announce a new debt relief initiative at COP26, tying debt relief to Green investment. At the Centre for the Study of Financial Innovation (CSFI), DRGR-author Stephany Griffith-Jones explains our proposal as an alternative based on the Brady Plan that helped Latin America in the 1970s/80s, in which creditors would swap existing debt for guaranteed debt (with a haircut).

Categories
Blog

Chart of the Week

Guaranteeing a Green and Inclusive Recovery

As the Global South grapples with a deadly pandemic and growing climate concerns, the United Nations Development Program estimates developing countries and emerging economies owe close to $1.1 trillion in debt service payments in 2021 alone. Comprehensive debt relief is needed to avoid this looming crisis, but existing relief structures, such as the G20’s Debt Service Suspension Initiative and Common Framework for Debt Treatments, fall short in meeting the severity of the moment.

A new report from the Boston University Global Development Policy Center, the Heinrich Böll Foundation and the Centre for Sustainable Finance at SOAS, University of London proposes an ambitious blueprint for comprehensive debt relief, anchored by a Guarantee Facility for Green and Inclusive Recovery that would ensure critical participation from the private sector.

Categories
Blog

A Debt Relief Plan for Green Recovery

In the “Breakingviews” section at Reuters, our co-authors Shamshad Akhtar and Ulrich Volz write about the deceptive calm and misplaced optimism in debt markets. They point out the enormous hurdles that developing and emerging economies face in recovering from the COVID-19 pandemic and meeting key climate and development goals at the same time.

Categories
Blog

Reuters Article on New DRGR-Proposal

Reuters reports exclusively on our report, developed by the Boston University Global Development Policy Center, the Heinrich Boell Foundation and the Center for Sustainable Finance at SOAS University of London.