A debt crisis is looming in the Global South. High levels of public debt service and insufficient fiscal and monetary space are threatening recoveries and impeding much-needed investments in climate resilience and the 2030 UN Sustainable Development Goals.
The Debt Relief for Green and Inclusive Recovery initiative proposes concerted and comprehensive debt relief on a global scale to free up resources in heavily indebted developing countries to support sustainable recoveries, boost economic resilience, and foster a just transition to a low-carbon economy.
Debt Relief for a Green and Inclusive Recovery
The proposal “Debt Relief for Green and Inclusive Recovery” published by the Heinrich Böll Stiftung, the Center for Sustainable Finance at SOAS, University of London and Boston University Global Development Policy Center suggests that low and middle-income countries with unsustainable debt burdens 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. Private creditors participating in the debt restructuring would swap their old debt holdings with a haircut for new “Green Recovery Bonds”.
Securing Private-Sector Participation and Creating Policy Space for Sustainable Development
The report “Securing Private-Sector Participation and Creating Policy Space for Sustainable Development” updates our proposal with more details on how countries can develop their green and inclusive recovery strategies, and how the private sector can be induced to participate in debt reduction.
Vulnerable countries suffer from huge debt and the climate crisis.
“Debt Relief for a Green and Inclusive Recovery” initiative would solve both crises in one go. This short video explains, how the proposal would work.
The summary blog by Katie Gallogly-Swan of the Boston University Global Development Policy Center summarizes the four steps proposed in the report “Securing Private Sector Participation and Policy Space for Sustainable Development” as a way to reform the G20 Common Framework.
The Statement on “Debt Relief for Green and Inclusive Recovery” is supported by 23 former Central Bank Governors and former Finance Ministers from around the world. The statement calls on the G20 to enact a Debt Relief for a Green and Inclusive Recovery Initiative that requires bilateral, multilateral, and private-sector debt relief on a grand scale, analogous to the Highly Indebted Poor Countries Initiative.