Center for Economic and Policy Research’s Post

Debt and crises collide as World Bank, IMF meetings begin The World Bank and International Monetary Fund annual meetings are set to kick off amid warnings of a looming donor funding crisis and record debt levels for countries battered by conflict and disasters. The 21-26 October meetings are a forum for policymakers to discuss economic challenges. Economic inequities are intertwined with today’s humanitarian crises. The world’s 26 lowest-income countries are “deeper in debt” than they’ve been in years, a World Bank analysis released before the meetings warned. They’re more vulnerable to disasters, the cost of adapting to climate change is higher, and many are snared in conflict, “yet international aid as a share of their GDP has dwindled to a two-decade low, forcing many to obtain financing on punishing terms”, the report said. Meanwhile, donor promises for major development, health, and climate funds could fall short in the coming months, the US-based Center for Global Development warned. It’s based on an analysis of current donor commitments and past funding to everything from the Global Fund and Gavi to new climate funds. Source: https://lnkd.in/gz9j5v-i

At this week’s World Bank Fall Meetings, it's crucial for world leaders to address the urgent debt crisis that threatens the progress of developing countries. The United Nations reports that nearly half the global population live in countries spending more on debt than on education or health services. Global public debt reached a staggering $92 trillion in 2022, with 45 developing countries bearing a disproportionate share. African countries pay four times more in borrowing costs than the U.S., and the number of countries with high debt levels has surged from 22 in 2011 to 59 in 2022. These statistics serve as a stark reminder of the global financing crisis derailing efforts towards climate resilience, poverty alleviation, and the fulfillment of the U.N.'s Sustainable Development Goals. World leaders must implement smart reforms to the Multilateral Bank infrastructure to unlock crucial funding and drive sustainable development. Increased support for the International Development Association (IDA), a vital financial mechanism that provides low-interest loans and grants to the world's poorest nations, is also essential.

Pakistan to seek additional IMF climate financing as well

For 80 years, these institutions have failed to address the needs of global South countries, pushing them deeper into debt and imposing harmful austerity measures. Despite following IMF advice for decades, many African countries are now in debt distress or facing a high risk of debt distress. At a time of climate crisis, global South countries are crippled by debt, unable to adapt. ActionAid demands debt cancellation and tax justice to build resilience against climate impacts. @Niranjali Amerasinghe, Country Director of ActionAid USA, also calls for fundamental changes: reformation of the IMF's leadership selection process, decision-making model, and harmful practices that keep developing countries in crisis. Read our full statement 👉 https://bit.ly/3W8yjZG

"Is a Serious Global Debt Crisis Possible?" In its latest issue, The International Economy magazine poses the question to top experts. The World Bank's Chief Economist, Indermit Gill, says that for the poorest countries, a serious #debt #crisis is no longer just a possibility. The crisis has arrived. https://lnkd.in/eBsyCwUe

How does the debt of the Global South fuel the Climate Crisis❓ The key creditors of Global South debt are the International Monetary Fund and the World Bank, development banks, commercial banks and mega-investors. Their lending is supposed to fuel the growth of the Global South. Instead, it fuels the growth of the Global North, as well as the climate crisis. Why is this? Because indebted countries are forced to extract their fossil resources and sell their land to corporations in the Global North in order to pay their debt and the interest that is piled on top of them. In addition, the IMF and World Bank are pushing for more extraction in these countries, sometimes even making extraction policies a condition for further debt agreements. That's why debt cancellation is a concrete step towards climate justice! Support us and take action! #ClimateJustice #DebtForClimate #DeudaXClima #DettePourLeClimat #DebtCancellation #JustTransition #PeopleNotProfit #DebtCrisis #DebtJustice

This is tragic. Today, we learnt that the country of 🇰🇪 pays 80% of its GDP towards debt service. How does it meet other needs let alone meet its climate bill? We urgently need a reform of our global financial architecture that serves communities and coubties not that strangles . We need a humane global financial architecture and do away with the old outdated one !

Unless there is #GlobalPeace and #multilateral #Cooperation, sustainable development efforts will be undermined by ongoing conflicts, violence, and instability. #Peace is the foundation that allows societies to thrive, economies to grow, and individuals to access essential services such as #Education, #Healthcare, and #Justice. Without a peaceful environment, the goals of eradicating #Poverty, reducing #Inequalities, and protecting the #Planet cannot be fully realized. #GlobalCooperation is crucial for addressing shared challenges like #ClimateChange, #Pandemics, and #Migration, ensuring all nations work together toward a common future of #Prosperity and #Wellbeing for all.

Global financial systems are interconnected vessels, where the policies of one country create ripples felt by others. Recently, Western economies, in their bid to tame inflation driven by “greedflation,” have adopted high interest rates. While stabilizing their own economies, this strategy has wreaked havoc on poorer nations, precipitating a sovereign debt crisis of unprecedented scale. As interest rates climb, the costs of borrowing soar for nations with substantial dollar-denominated debt. This vicious cycle drains national budgets, stifles economic growth, and forces austerity measures that devastate livelihoods and deepen inequalities. The Global South is effectively condemned to tread water in a sea of debt while wealthier nations consolidate their prosperity. A comprehensive overhaul of international debt policies is long overdue. Without systemic reform, the Global South will remain ensnared in cycles of borrowing and austerity. Read my latest op-ed for a more detailed analysis of this growing crisis. https://bit.ly/4fV0Qsi

Rising debt burdens are forcing developing nations to choose between paying creditors and investing in climate action and sustainable development. Urgent debt relief, like new SDR allocations, is needed to help free heavily indebted countries from this vicious cycle.