The need for debt-for-climate swaps
Dec 16,2020 - Last updated at Dec 16,2020
By Shamshad Akhtar, Kevin P. Gallagher, Stephany Griffith-Jones, Jörg Haas and Ulrich Volz
ISLAMABAD — A global debt crisis is looming. Even before COVID-19 swept the world, the International Monetary Fund had issued a warning about developing countries’ public debt burdens, noting that half of all lower-income countries were “at high risk of or already in debt distress”. As the economic crisis worsens, these countries are experiencing steep output contractions at the same time that COVID-19 relief and recovery efforts are demanding a massive increase in expenditures.
According to the United Nations Conference on Trade and Development, developing countries’ repayments on their public external debts will cost $2.6-$3.4 trillion just in 2020 and 2021 alone. Hence, market analysts now suggest that almost 40 per cent of emerging- and frontier-market sovereign external debt could be at risk of default in the next year.