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Sri Lanka May Be the Next Country to Introduce ‘Debt-For-Nature’ Swaps to Mitigate Economic Crisis

‘Debt-for-nature’ swaps are re-emerging as a solution to economic crises caused by the pandemic. Now, the United Nations has called on Sri Lanka to negotiate “debt-for- nature” swaps tied to environmental protection to ease the country’s economic meltdown.

According to an article by Financial Times, the UN Development Program submitted the proposal, along with the suggestion of introducing a temporary basic income, in a document that has now been submitted to President Gotabaya Rajapaksa’s government and will be considered by the Cabinet, which was recently sworn in.

Earlier, the government, which has to pay about $8 billion in debt and interest this year, suspended bond payments and began negotiations for an IMF bailout package. The heavily indebted island nation had been unable to repay loans due to low foreign currency reserves, triggering an economic and political crisis with mass protests over food, fuel and medicine shortages.

UNDP argues that Sri Lanka, which has long-term debts of about $45 billion to creditors such as international bondholders and countries like India and China, needs immediate financial support. The UN body has therefore asked Sri Lanka to seek swaps and short-term financing from said countries to ease the economic pain ahead of IMF assistance.

Sri Lanka is in the midst of its worst economic crisis in decades – but the country’s situation is not unique. Concerns about a debt crisis in the Global South are steadily growing. DRGR, therefore, proposes comprehensive debt relief that is oriented around green, inclusive recovery.

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More Aggressive Moves to Fight Debt Distress Needed, UNDP Report Finds

The report analyses debt vulnerability across 120 low- and middle-income economies to identify which are most at risk. 72 economies are considered “vulnerable”, of which 19 are “severely vulnerable.”

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UNDP Discussion on DRGR-Proposal (Video)

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:

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UNDP hosts discussion on DRGR-Proposal

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.

SPEAKERS:
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)