30 June 2021
A new report co-written by economists at the SOAS University of London calls for a new approach to debt relief which is linked to a green and inclusive recovery.
The report, Debt Relief for a Green and Inclusive Recovery: Securing Private-sector Participation and Creating Policy Space for Sustainable Development, lays out an ambitious proposal for 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.
High levels of debt service are impeding crisis responses and contributing to a worsening development prospects in many low- and middle-income countries. It also threatens the ability of countries to adapt to the impending climate crisis and to achieve the 2030 Sustainable Development Goals.
The report contains a series of proposals including that the IMF and the World Bank perform an enhanced Debt Sustainability Analysis; the creation of a Guarantee Facility for Green and Inclusive Recovery hosted by the World Bank to facilitate debt restructuring involving private creditors, and Governments receiving debt relief would commit to reforms that align their policies and budgets with the 2030 Sustainable Development Agenda and the Paris Agreement.
Ulrich Volz, Director of the Centre for Sustainable Finance at SOAS and lead author of the report, said: “Delaying an inevitable debt restructuring will leave overindebted countries and their populations worse off. Governments will fail to safeguard their populations during this terrible health and social crisis, and they will be unable to invest in climate-proofing their economies. It is time for the G20 to step up and provide all countries with the opportunity to pursue a green, inclusive, and resilient recovery. The world cannot afford a replay of past debt crises while facing a planetary emergency.”
The report has been co-published by the SOAS Centre for Sustainable Finance, Boston University’s Global Development Policy Center, and the Heinrich Böll Foundation.