As the new year unfolds, global dynamics are set for pivotal shifts, with high-profile elections and important forums shaping the international stage – and influencing how the world addresses mounting sovereign debt, climate change, and social inequality. Here is an outlook on some of the most critical course-setting events in the months to come.
by Arabella Wintermayr (Editor) & Sarah Ribbert (Project Coordinator)
In this new year, the international stage is set for a series of high-profile elections, geopolitical shifts and critical events that will undoubtedly shape the trajectory of nations worldwide. These nations will, too, considerably influence how the issues of mounting sovereign debt, climate change and social inequality are addressed this year.
While challenges loom, there are opportunities that, if seized, could pave the way for a more sustainable and equitable future. Here is an outlook on some of the most critical course-setting events in the months to come.
Election Year Dynamics and New Coalitions: Crucial Variables for Debt Relief
As upcoming elections in the United States, India, Iran, South Africa and the European Union hold the potential to impact the global debt relief agenda significantly, they are crucial variables to watch. The accompanying political transitions could either propel or hinder the pursuit of debt relief strategies, and will undoubtedly influence the geopolitical landscape and set the tone for international cooperation for the next handful of years.
The year 2023 showed that nations, amidst conflict, can unite in the face of interconnected challenges. It witnessed remarkable shifts in coalitions and alliances, particularly evident at the 2023 United Nations Climate Change Conference (COP28) and in the collaboration between Kenya, Colombia, France and Germany. Together they launched the Global Expert Review on Debt, Nature and Climate that will “conduct a comprehensive assessment of how sovereign debt impacts the ability of developing countries to conserve nature, to adapt to climate change, to decarbonise their economies, and how it can become more sustainable, both fiscally and environmentally.” The coalition of experts, set to present its recommendations at the next UN climate change conference, COP29, is a testament to the potential for cross-regional cooperation.
With new members joining the BRICS and the African Union becoming a member of the Group of 20 (G20), the time is ripe for collaborative efforts in addressing global debt challenges, including voices that are not often amplified at the global level.
A Critical Year for Debt and Development: Developing Countries at the Crossroads
Statistics from the United Nations Conference on Trade and Development (UNCTAD) underscore the urgency of solving increasing debt pressures, revealing that 3.3 billion people live in countries spending more on external debt service than on public health or education. In 2022, developing countries spent a record amount in debt service, given higher levels of interest rates and dollar appreciation. There is a growing concern that debt obligations are competing with social economic priorities for sustainable development, climate and the fight against poverty and hunger. As interest rates are expected to be ‘high for longer’ in advanced economies while a number of countries will deal with bond maturities in the next few years, the stress on developing countries will likely persist, making debt relief and the mitigation of default risks incredibly important.
Against this backdrop, the International Monetary Fund (IMF) and the World Bank are set to review the Debt Sustainability Framework (DSF) for low-income countries. Advocates, including the DRGR Project, have long called for a reform of the DSF that incorporates climate risks and climate change investment needs. The review presents an opportunity to reshape the global financial landscape, ensuring that debt sustainability considerations align with the challenges of the 21st century. The IMF and World Bank Group will convene in April for their regular Spring Meetings, as well as the Annual Meetings in October 2024.
Key International Forums: Catalysts for Progress
The Brazil G20 Presidency is another potential catalyst for progress on the debt agenda, as the country signals willingness to address the reform of the international financial architecture, especially highlighting the role of multilateral development banks. Brazil’s eagerness to have close coordination between G20’s Finance and Sherpa Track promises more consistent implementation of essential policies, offering the possibility for tangible outcomes. As Marina Zucker-Marques and Maria Fernanda Espinosa of the DRGR Project recently argued in Brazil’s Valor, the Brazilian G20 has several key opportunities to lead on debt relief this year.
Furthermore, the UN Summit of the Future, scheduled for September 2024, presents a unique platform to accelerate efforts and respond to emerging challenges. With Germany and Namibia co-facilitating the intergovernmental preparatory process, the Summit aims to foster multilateral collaboration through a “Pact for the Future”. This action-oriented outcome document could serve as a stimulus for debt relief, setting the stage for the Financing for Development Conference in 2025.
Notably, the UN Secretary-General’s Common Agenda includes a policy brief on international financial architecture reforms. These proposed reforms align with important calls from academia and civil society, emphasizing the importance of addressing the debt crisis comprehensively, for example, by including middle-income countries in the G20 Common Framework.
COP29 in Azerbaijan: A Challenging Arena with Room for Collaboration
While the political landscape at COP29 in Azerbaijan may prove challenging, the experience of COP28 demonstrated that despite differing national interests, progress on the climate agenda is not only possible but achievable. The COP will certainly be an event to watch closely.
Through global cooperation, political will and strategic reform, interconnected challenges like debt and climate change can be tackled. Stay tuned for more updates as the year progresses.
Thanks for reading, and until next time.
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