The countries of the Global South have
contributed little to the climate crisis, but they are particularly
vulnerable to its impacts. Now, as a result of COVID-19, debt levels
in the Global South have skyrocketed. As a consequence, a triple crisis of health, climate,
and lost development is looming. How can highly indebted developing
countries respond to these challenges? A new proposal lays out a blueprint
for comprehensive debt relief that frees up significant resources for countries
to mount green and inclusive recoveries and achieve their climate
and development goals. Here's how it would work. Step 1 – Analysis To start, the International Monetary Fund
and the World Bank integrate climate resilience
and the Sustainable Development Goals into the debt sustainability analysis
they conduct on behalf of members. Middle-income countries that are
traditionally excluded from debt relief initiatives would also be eligible. Step 2 – Recovery Strategy Governments with unsustainable debt develop a green and
inclusive recovery strategy, aligning policies and budgets with the Paris Climate Agreement
and the Sustainable Development Goals. Policymakers and stakeholders
provide input, creditors give feedback. Step 3 – Debt Reduction Upon agreement on the strategy, countries receive a reduction
on their overall debt level, which will be applied equally across debt
owed to public and private creditors.
Step 4 – Private Creditor Involvement Along with the debt reduction,
private creditors are able to exchange old bonds for
new green and inclusive recovery bonds, which support
the implementation of the strategy. These new bonds come with a guarantee making them more secure
than the old bonds. Step 5 – Monitoring A portion of the country's debt service is channelled into a fund for
green and inclusive recovery. The funds are used to support
nationally determined climate priorities and will be monitored
by a multi-stakeholder commission. Servicing debt payments cannot come at the cost of vital
climate and development needs. By enacting comprehensive debt relief,
the international community can enable green and inclusive
recoveries for developing countries. Nothing less than the well-being of a large
part of the world depends on it. Learn more at our website..