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.
World leaders have added their voices to a growing chorus calling for comprehensive debt relief linked to a green and inclusive recovery that involves private sector participation and middle-income countries. Our new report provides a blueprint for doing just that.
The efforts to support low income countries (LICs) with unsustainable debt burdens do not go far enough, the DRGR authors Kevin Gallagher, Shamshad Akhtar, Stephany Griffith-Jones, Ulrich Volz and Moritz Kraemer argue in a text published on the online presence of the Italian Institute for International Political Studies (ISPI).
Originally published in November 2020 by the Heinrich Böll Foundation; the Center for Sustainable Finance at SOAS, University of London; and Boston University’s Global Development Policy Center, the DRGR report is now also available in Spanish translation.
The report “Debt Relief for Green and Inclusive Recovery” proposes that low and middle-income countries with unsustainable debt burden receive substantial debt relief by public and private creditors, in order to provide fiscal space for investment in Covid-19-related health and social spending, climate adaptation and green economic recovery strategies.
At “Project Syndicate”, the DRGR authors Shamshad Akhtar, Ulrich Volz, Moritz Kraemer and Stephany Griffith-Jones warn against dangerous shortsightedness in sovereign-debt restructurings and suggest steps for comprehensive debt relief oriented around a green, inclusive recovery.
The COVID-19 crisis has come at the worst possible time for humanity. The poorest countries were already struggling to meet their development goals in the face of cyclones, wildfires, and droughts, and the world now has only a decade left to slow down increases in global temperature and sea levels before they become catastrophic, and invest in climate-resilient development.
The DRGR report calls on the G20 calls on the G20 to move beyond the Common Framework for Debt Treatments and to require public and private creditors to provide a substantial debt cut to a broad set of low- and middle-income countries, in exchange for a commitment to a green and inclusive recovery.
Op-Ed by Shamshad Akhtar, Kevin P. Gallagher, Stephany Griffith-Jones, Jörg Haas, Ulrich Volz
With developing countries facing a debt crisis that will only get worse as the COVID-19 pandemic continues, it is already inevitable that massive debt relief will be necessary. The only question is whether it will be designed to address the even larger climate crisis that is approaching.