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.