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.
“Five ways to align debt with climate and development goals”: Katie Gallogly-Swan, Rebecca Ray and B. Alexander Simmons from the Boston University Global Development Policy Center published an Op-Ed on the web presence of the “World Economic Forum” quoting the DRGR project.
Due to its immense debt burden aggravated by the COVID-19 pandemic, the East African country plans to approach creditors for suspension of repayments. After Ethiopia, Zambia and Chad, Uganda is another cautionary example of the debt crisis the Global South is about to face.
The Bretton Woods Project is a civil society network hosted by ActionAid. It envisions a global economic system that operates on the primary principles of justice, equity, gender equality, human rights and environmental sustainability, with international institutions that are democratic, inclusive, transparent, accountable, and responsive to citizens, especially the poorest and most vulnerable.
In a recent posting, it evaluates the G20 ‘Common Framework for Debt Treatments”. It starts with a quote from Gordon Brown’s speech at the launch of the report ‘Debt Relief for a Green and Inclusive Recovery‘: “despite the promises made by the G20, the IMF and the World Bank to stand behind them in their hour of greatest need,” the world’s poorest countries had “received only about a fraction of what they need in debt relief.”
Three main points summarise its critique:
- G20 announces disappointing common framework for debt restructuring
- Framework relies on much-critiqued IMF and World Bank debt sustainability analysis
- Debtor countries must agree to IMF treatment as condition of debt relief
Read yourself further on the website of the Bretton Woods Project.
“Nature”, a weekly international journal distributing peer-reviewed research, published an analysis that warns against the risks of a severe debt crisis if climate change is not taken into account when governments lend money during the pandemic. The text suggests three steps that match the DRGR proposal.
According to the briefing “A debt pandemic: Dynamics and implications of the debt crisis of 2020”, public debt of developing countries has increased from an average of 40 to over 60 percent of GDP within the last ten years. More than one-third of the increase took place in 2020 alone.
On February 24, UNDP hosted an online-discussion on our proposal for Debt Relief for a Green and Inclusive Recovery. Read the full announcement here.
Three of the report authors, Shamshad Akhtar, Stephany Griffith-Jones, and Ulrich Volz presented its key elements and calls for action.
They were then joined by the UNDP colleagues
- Luis Felipe Lopez Calva (UN ASG and UNDP Director, RBLAC),
- Celine Moyroud (UNDP Resident Representative, Lebanon) and
- Raymond Gilpin (Chief Economist, UNDP Africa).
The discussion was moderated by George Gray Molina (GPN Chief Economist, UNDP).
Full Video Recording:
On February 24, UNDP ist hosting an online-discussion on our proposal for Debt Relief for a Green and Inclusive Recovery. Here is the announcement:
The CoP on Poverty and Inequality invites you to a global webinar on Debt Relief for a Green and Inclusive Recovery to discuss the recent report of the same name on Wednesday, 24 February at 8:00 AM EST (2:00 PM CET).
The report, a joint initiative of the Boston University Global Policy Center, the Heinrich Böll Stiftung, and the Centre for Sustainable Finance, ”outlines an ambitious proposal for comprehensive debt relief that includes the private sector and middle-income countries, in an effort to jump start a green and inclusive recovery from COVID-19.” Three of the report authors, Shamshad Akhtar, Stephany Griffith-Jones, and Ulrich Volz, will start the conversation and present the main takeaways and calls for action. We’ll then be joined by UNDP colleagues to discuss findings for UNDP’s work across regions.
Shamshad Akhtar, Report Author, Development Economist and Diplomat
Stephany Griffith-Jones, Report Author, Financial Markets Director at the Initiative for Policy Dialogue and Emeritus Professor
Ulrich Volz, Director of the Centre for Sustainable Finance and Reader in Economics at SOAS, University of London
Luis Felipe Lopez Calva, UN ASG and UNDP Director, RBLAC
Celine Moyroud, UNDP Resident Representative, Lebanon
Raymond Gilpin, Chief Economist, UNDP Africa
MODERATOR: George Gray Molina, GPN Chief Economist, UNDP
24.Feb..2021 08:00 AM in Eastern Time (USA und Kanada)
Statement on Debt Relief for a Green and Inclusive Recovery
The COVID-19 crisis is the biggest threat to human prosperity and a healthy planet in close to a century.
As the world confronts a new wave of the COVID-19 virus, the United Nations reports that many developing countries are forced to deploy 30-70 percent of government revenues to pay off international creditors rather than pursue these broader goals.
The World Bank estimates that upwards of 150 million people could be pushed into extreme poverty by 2021, with 8 out of 10 of these ‘new poor’ in middle income countries.
This is not the time for nation-states to be forced to trade their people and futures for international debt repayments that have ballooned for reasons largely out of their control, putting action on our shared climate change and sustainable development goals on hold.
It is the time to reset and restart our economies in a new direction with inclusivity, climate and development goals at the core of the recovery effort.
To that end, we the undersigned call on the G20 and world leaders to provide debt relief to emerging market and developing countries with unsustainable debt burdens so they can secure fiscal space to combat the virus, protect the vulnerable, and secure a green and inclusive recovery.
We also support a substantial new allocation of the International Monetary Fund’s Special Drawing Rights, accompanied by a significant increase in multilateral and regional development bank financing aided by an increase in those banks’ capital. These measures are necessary to finance health, social protections and climate transitions for emerging market and developing countries in need.
We therefore call 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.
A G20 emergency summit on a Green and Inclusive Recovery in response to the debt crisis is overdue. We urge the Italian G20 presidency to initiate such a summit as soon as the Biden administration has come into office.
An unprecedented crisis requires an unprecedented response. It is time for G20 leaders to advance comprehensive debt relief and new financing to secure sustainable development and climate goals.
Marion Williams – former Governor of the Central Bank of Barbados
Atiur Rahman – former Governor of the Bangladesh Bank
Salehuddin Ahmed – former Governor of the Bangladesh Bank
Luiz Carlos Bresser-Pereira – former Finance Minister of Brazil
Nelson Barbosa – former Finance Minister of Brazil
Roberto Zahler – former Governor of the Central Bank of Chile
Jose Antonio Ocampo – former Finance Minister of Colombia
Hans Eichel – former Finance Minister of Germany
Patrick Honohan – former Governor of the Central Bank of Ireland
Y.V. Reddy – former Governor of the Reserve Bank of India
D. Subbarao – former Governor of the Reserve Bank of India
Rakesh Mohan – former Deputy Governor of the Reserve Bank of India
Njuguna Ndung’u– former Governor of the Central Bank of Kenya
Andrew Mullei – former Governor of the Central Bank of Kenya
Fazeel Najeeb – former Governor of the Maldives Monetary Authority
Sanusi Lamido Sanusi – former Governor of the Central Bank of Nigeria
Shamshad Akhtar – former Finance Minister of Pakistan and State Bank of Pakistan Governor
Oscar Dancourt – former Governor of the Central Bank of Peru
Jean-Paul Adam – former Finance Minister of Seychelles
Momodu Kargbo – former Finance Minister and Governor of the Bank of Sierra Leone
Rob Davies – former Minister of Trade and Industry for South Africa
Chalongphob Sussangkarn – Former Finance Minister of Thailand
Louis Kasekende – former Deputy Governor of the Bank of Uganda
Note: The statement was featured in the Financial Times
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.