EXCLUSIVE – World Bank and IMF Consider Ways to Link Debt Relief to Climate Change Spending
The World Bank and the International Monetary Fund are planning to launch a platform to advise poor countries on financing climate and conservation activities, as part of a larger push that could link such spending to debt relief. debt, according to a draft document viewed by Reuters.
The advisers would include officials from the UN, non-governmental organizations, private investors and even rating agencies with expertise in finding investments, including grants, low- or no-interest loans, and debt relief. conditional, indicates the document. The initiative reflects the growing recognition that the economic turmoil of the COVID-19 pandemic has exacerbated budget constraints and debt issues that are hampering the ability of some countries to switch to clean energy, protect wildlife or provide changes to infrastructure to prepare for climate impacts.
“Unlike other initiatives which focus on one project at a time, this will focus on systematically changing entire economies,” said a source close to the initiative, who added that the platform aims for a more holistic approach to “the triple debt crisis, climate change and biodiversity loss. In an interview in February, World Bank President David Malpass raised the possibility of linking debt relief to investments to tackle climate change and reduce fossil fuel emissions, but provided no further details.
The institutions’ discussions towards this goal are detailed in a World Bank debt document posted Monday on the bank’s website for their annual spring meetings. He said they were developing an “organizational framework” to link debt relief to countries’ plans to invest in “green, resilient and inclusive development”, or GRID – the newest catch-all acronym of the bank.
“For countries that are close to their debt limits, financing GRID will require sufficient grants and concessional loans that could be augmented by conditional debt relief or reprofiling,” the joint document said. The World Bank estimates that more than 30 of the world’s poorest countries are over-indebted or at high risk. Three of them – Chad, Ethiopia and Zambia – have called for debt restructuring under a common framework agreed last year by China, the world’s largest bilateral creditor, and other major economies. of the Group of 20 with the Paris Club of official creditors.
Last month, a separate technical working group started working on the new Debt / Climate / Nature platform. It will enable experts from the public and private sectors to provide technical assistance and data to countries on possible investments and help them find public and private funding, according to the document. A second source said planning was still in its early stages, but the goal was to launch the platform in late 2021, with a secretariat hosted at the World Bank.
“If not addressed or addressed in a way that ignores macroeconomic vulnerabilities and debt sustainability constraints, climate change and the loss of nature pose a systemic risk to the global economy.” , indicates the document. The platform, however, would not replace debt treatment talks in the common Group of 20 framework, the document said. Instead, he could provide advice on how to proceed after the debt relief is agreed.
(This story was not edited by Devdiscourse staff and is auto-generated from a syndicated feed.)