World Bank and IMF consider climate change in debt reduction negotiations
WASHINGTON (Reuters) – The World Bank is working with the International Monetary Fund (IMF) on ways to factor climate change into negotiations to reduce the debt burden of some poor countries, the president of the World Bank said on Friday. World Bank, David Malpass, to Reuters.
Three countries – Ethiopia, Chad and Zambia – have already started negotiations with creditors under a new common framework supported by the Group of 20 major economies, a process that can lead to debt reductions. in some cases.
Malpass said he expected other countries to seek debt restructuring, but declined to give details.
The coronavirus pandemic has worsened the outlook for many countries already heavily indebted before the epidemic, with falling incomes, rising spending and vaccination rates far behind advanced economies.
China, the United States and other G20 countries initially offered the world’s poorest countries temporary relief on debt payments owed to official creditors as part of the Debt Service Suspension Initiative (DSSI). In November, the G20 also launched a new framework to tackle unsustainable debt stocks.
Malpass said the Bank and the IMF are exploring how to twin two global issues – the need to reduce or restructure the heavy debt burden of many poorer countries and the need to reduce fossil fuel emissions that contribute to climate change.
“There is a way to relate … the need for debt reduction with the need for climate action on the part of countries around the world, including the poorest countries,” he said. said, adding that the initial efforts could be within the framework of the G20.
Taking climate change into account in the debt restructuring process could help motivate sovereign lenders and even private creditors to write off a certain percentage of the debt of heavily indebted poor countries, in exchange for progress towards their development goals. sustainable and climate-friendly, according to experts.
The World Bank and the IMF play an important advisory and advisory role in debt restructuring negotiations, as they assess the sustainability of each country’s debt burden.
Many developing countries need huge expenditures to consolidate their food supplies and infrastructure due to climate change. Governments also have to spend a significant amount of money on alternative energy projects, but do not have the resources to pay for the necessary investments.
“There has to be moral recognition by the world that activities in advanced economies impact people in poorer economies,” said Malpass.
“The poorest countries don’t really emit a lot of greenhouse gases, but they bear the brunt of the impact of the rest of the world,” he added.
Earlier this month, IMF Managing Director Kristalina Georgieva briefed reporters on ongoing preliminary discussions on the link between debt relief and climate resilience and investing in energy sources. low carbon emission.
This could help private sector creditors meet their sustainable development goals, she said.
“You give the country a break, and in return, you as a creditor can demonstrate that this translates into a commitment in the country that leads to a global public good,” she said.
Reporting by Andrea Shalal; Editing by Aurora Ellis