Linking debt (relief) to climate vulnerability

Danny Cassimon and George Mavrotas

Development Finance Agenda, 2024, vol. 9, issue 1, 6-8

Abstract: In our previous contribution (Cassimon & Mavrotas, 2023), we dealt with the current status of (low-income country, LIC) debt vulnerabilities built up in recent years and the reactions so far of the international community in terms of recent debt rescheduling and relief initiatives proposed, in comparison with the previous (HIPC) debt crisis period about 25 years ago. We highlighted that the debt distress levels in many LICs have reached alarming levels, but so far current international community responses, particularly through the DSSI and Common Framework initiatives, have not produced lasting solutions, a.o. because of increased creditor heterogeneity and debtor country reluctance to participate (see e.g. Essers & Cassimon, 2022; Cassimon et al., 2023). One additional observation is that these current initiatives so far lack an explicit link with debtor country climate vulnerabilities, and the level of financing these countries need for climate mitigation and adaptation investments. As such, as mentioned in our previous contribution, we will zoom in on debt (resolution) proposals being put forward that try to kill ‘two birds with one stone’, in trying to establish this closer link between curing debt problems and solving environmental problems, i.e. earmarking debt (relief) to green use, simultaneously propagating debt and environmental sustainability.

Date: 2024
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