Rishikesh Ram Bhandary’s Post

Check our article in Foreign Policy on how to transform debt-for-nature swaps to deal with the trip crisis of debt, climate change, and biodiversity loss. We propose scaling and reforming these niche financial instruments so that they can truly deal with these massive crises.

The Task Force on Climate, Development and the IMF published its recommendations on how to enhance IMF/WB Low Income Country Debt Sustainability Framework. Our top line recommendation is to capture climate risks and growth enhancing effects of climate investments. We also make recommendations on improving data, scenario design, the role of macro-financial models, and why a risk management approach can help us get serious about possibly high impact risks. https://lnkd.in/dRHSDSKd Tim Hirschel-Burns and I wrote up a blog to answer some questions on why the debt sustainability analysis matters for climate change and development https://lnkd.in/dhtU_GgP

“The world’s poorest and most climate-vulnerable countries are spending more than twice as much to service their debts as they receive to fight the climate crisis, according to new analysis by IIED. It also shows the situation is getting worse, with debt payments growing at a faster rate than climate support… Climate change is an existential problem for many heavily indebted LDCs and SIDS because they are so highly exposed to climate impacts yet have very little fiscal room to adapt. When a drought, flood or major storm hits, they are forced into a vicious cycle of borrowing more money to support their people and rebuild their infrastructure, further compounding their debts…. Rethinking debt and providing climate finance are two sides of the same coin. Both are needed to help the most vulnerable countries respond to climate change.” This new report from IIED shines a critical light on the tensions between debt and climate finance. Indeed, many counteries are required to expand their fossil fuel production just to meet their debt requirements. This viscous cycle needs to be urgently addressed as the world moves closer to grappling with climate finance. https://lnkd.in/eRHgtpV5

A great Tuesday morning! What a day! If you don’t know what " climate-sovereign debt doom loop" is, then this is a post for you! Not one country is on track for a 1.5C future based on 2030 national pledges for cutting emissions, according to the Assessing Sovereign Climate-related Opportunities and Risks Project. Climate risks increase the cost of debt, making debt servicing more difficult. At the same time, climate-related damages reduce fiscal space, making it difficult to secure debt financing for mitigation or adaptation policies to reduce climate risks. A doom loop emerges, with low-income countries particularly vulnerable.  What’s more, the review of 70 countries’ emissions and policies shows “no overwhelming trend” that wealthier countries are doing a better job of tackling climate change.  Investors largely agree that climate risks aren’t fully priced into markets, and academics are now studying what they’re calling the climate-sovereign debt doom loop to calculate the potential costs to countries. The 70 targeted for review make up 100% of the three main sovereign debt bond market indexes, according to the report.   The report’s authors concluded that more than 80% of wealthy countries aren’t contributing their proportional share of an annual $100 billion international climate finance goal, which was increased to $300 billion at the COP29 climate summit in Baku. Have a great debt doom loop Tuesday! https://lnkd.in/dZ7nrNRY

We were invited to the G20 IMF/WB Sovereign Debt Roundtable to discuss how to address the twin crises of #debt and #climate. With Maia Colodenco we argued for the need of a Sustainable Financing Strategy for the Green Transition.  The twin challenge of debt and climate crises that developing economies are currently facing requires large-scale, up-front investments that allow countries to implement a well-designed climate action to boost economic growth. Focusing solely on ex-ante and ex-post debt instruments is not enough to overcome it.  Read our paper below 👇 : https://lnkd.in/dfKRB9e5 https://lnkd.in/dBw_wz9e

According to a new report from the Debt Relief for Green and Inclusive Recovery (DRGR) Project, the world will need to spend $3 trillion a year to achieve the climate goals outlined in the Paris Agreement and the UN 2030 SDGs. #DRGR #developingnations #climategoals #SDGs #EMDE #investments #financing

Debt for Climate swaps Several African countries are pushing for Debt-for-Climate swaps to tackle climate change and debt crises. More than 20 African countries are considering halting repayment of $685 billion in debt, with the goal of swapping debt for investment in climate projects. Clearly, while this can be viewed as an answer to shake up the debt burden of debt stricken countries, the process might need to address some of the potential challenges and limitations: 1. Debt-for-climate swaps involve intricate long negotiations and structuring so the complexities must be addressed 2. Limited availability of funds for debt forgiveness and climate finance, meaning it might have scalability issues 3. Policy and institutional barriers, meaning it requires such support 4. Monitoring and evaluation ensuring effective use of redirected funds. In this context, it is desirable to consider 1. Standardizing processes👉by developing guidelines and best practices. 2. Scaling up initiatives👉Increasing participation and funding 3. Integrating with national climate strategies👉Aligning debt-for-climate swaps with country-led climate goals.

Barbados implements groundbreaking Debt-for-Climate Resilience swap - https://lnkd.in/gJkiJpEg - In a groundbreaking effort to combat climate change while alleviating its debt burden, Barbados has successfully implemented the world's first debt-for-climate resilience swap. This innovative strategy aims to enhance the island nation's climate adaptation initiatives while easing the financial pressure of high-interest loans. The agreement entails substituting a portion of Barbados's

Barbados implements groundbreaking Debt-for-Climate Resilience swap - https://lnkd.in/gZdiRqn2 - In a groundbreaking effort to combat climate change while alleviating its debt burden, Barbados has successfully implemented the world's first debt-for-climate resilience swap. This innovative strategy aims to enhance the island nation's climate adaptation initiatives while easing the financial pressure of high-interest loans. The agreement entails substituting a portion of Barbados's

⚡Just in: A NEW report commissioned by the governments of Colombia, Kenya, France, and Germany lays bare the devastating effect of debt burdens for many vulnerable low-income countries. The Expert Review on Debt, Nature, and Climate reveals the extent to which unsustainable debt burdens, loss of in nature, and escalating climate change are compounding one another in a hugely destructive '‘triple crises''. Ali Mohamed, Special Envoy for Climate Change-Executive office of the President of Kenya & Chair of African Group of Climate Negotiators says: “This interim report highlights the inescapable reality that we cannot address the climate crisis without tackling the growing burden of debt. Vulnerable nations are caught in a cycle of borrowing to recover from climate disasters, further straining their economies. It’s time for the global community to come together, not just to restructure debt, but to recognize that investments in nature and climate resilience are fundamental to long-term economic stability. Our goal is to turn this vicious cycle into a virtuous one, where sustainable investments lead to prosperity and resilience, rather than debt distress.” ➡️ For more information, see the full report: https://lnkd.in/dnCiCP_w Center for Global Development, BNP Paribas, University of Massachusetts Amherst, World Resources Institute, Utrecht University, Boston University Global Development Policy Center, Inter-American Development Bank, CEB - Council of Europe Development Bank, Institute of Finance and Sustainability (IFS), Bruegel - Improving economic policy, Council on Foreign Relations, Resilient Earth Capital, Universidad de Los Andes, Universidad Internacional del Ecuador, The Liquidity and Sustainability Facility (LSF), LBBW