World Bank roll out debt relief plans for low-income nations

World Bank roll out debt relief plans for low-income nations

The idea of ​​writing off poor countries’ debt in exchange for “green” investments gained traction this week during the spring meetings of the IMF and World Bank, and concrete proposals are expected in time for a global climate summit this fall. Low-income countries face a double crisis: they are under pressure to pay their debt and at the same time face environmental problems. That makes them “highly, highly vulnerable,” Kristalina Georgieva, managing director of the International Monetary Fund, said this week, adding that it, therefore, makes “sense” for the world to seek so-called “green debt swaps.”

A spokeswoman for the World Bank underscored that point.

“The Covid-19 crisis has made it much more difficult for developing countries to address the growing risks posed by climate change” and environmental disasters, said the spokeswoman, who declined to be named.

With already tight budgets, these countries have had to use emergency financial assistance to address the severe impact of the pandemic and the resulting economic crisis.

“By increasing the debt burden on governments, which were already at record levels on the eve of the crisis, it has left them with fewer resources to invest in a recovery that will also put the planet on a more sustainable footing,” the spokeswoman said. AFP.

‘Creative options’

A technical working group, bringing together representatives not only from the IMF and the World Bank but also from the United Nations and the OECD, was launched this week to examine “creative options to help countries meet these simultaneous challenges.” said the World Bank spokeswoman.

“This work has just begun,” he said, “but we believe that a proactive approach is essential: we must look closely at how possible solutions to the climate and debt challenges can be integrated to address the key development problems of our time.” ”

While there is no timetable yet for announcing concrete measures, all parties involved are clearly pointing towards the COP26 climate summit to be held in November in the Scottish city of Glasgow.

“We are going to work with the World Bank. And by COP26 we will move forward with that option” of a debt swap, Georgieva said, adding that then it will be up to the creditors and debtors to decide whether to participate.

For Thierry Deau, founder and CEO of the Paris-based Meridiam group, which specializes in the development and financing of infrastructure projects, if the green debt swap option is to be pursued, it will have to be linked to clear “conditionalities” To ensure that the debt, in fact, relief leads to the launch of green projects.

Job opportunities

“The main responsibility for this debt relief is between the countries that are on both sides,” he said. “There is a lot of courtesy on this issue, and I think we have to stop that and create real partnerships.”

The IMF and World Bank will also have to consider the plight of several island nations with middle-income economies that receive less financial support but face enormous environmental challenges.

Their economies, largely reliant on tourism, have seen income dry up as the coronavirus pandemic dramatically reduces world travel.

At the same time, its lowlands are often the victims of extreme weather events, including devastating cyclones or hurricanes.

Georgieva said this week that vulnerability to climate shocks should be taken into account when international agencies allocate financial aid.

He also emphasized that countries that launch “green” projects can see the added benefit of increased employment.

“There are opportunities for job creation,” he said. “Take renewable energy, for example: seven jobs to one in the traditional coal power sector,” even if some training is required.

“Similarly, reforestation, caring for land degradation, resistance to climatic shocks – these are all very labor-intensive activities,” Georgieva said. “Lawmakers need to think about it now.”