A recent report from the Boston University Global Development Policy Center has urged for an urgent global initiative in 2024 to assist vulnerable nations in preventing financial collapse and addressing climate change.
- The report urged for an urgent global initiative in 2024 to assist vulnerable nations in preventing financial collapse and addressing climate change.
- 62 developing economies, including most of Africa and Oceania, are already in a severe debt crisis or urgently require restructuring.
- Chad, Niger and Guinea-Bissau are all highly vulnerable to global warming.
The suggested measures include extensive debt relief and even proposing a China-led iteration of the Brady Bond plan, Reuters reported. The report warned that 62 developing economies, including most of Africa and Oceania, are already in a severe debt crisis or urgently require restructuring.
The spike in global interest rates last year, coupled with lacklustre post-pandemic economic rebounds and the expenses associated with climate change, has led to a near-record number of countries spending at least 20% of their government revenues on servicing debt. This level of debt service is deemed unsustainable.
Around 21 countries make half of those payments to multilateral development banks (MDBs) like the World Bank, according to the report. Also, eight countries find themselves in a similar situation with China, two with the Western “Paris Club” governments, and two with their international bondholders.
“The world is facing a now or never moment,” the report published on Sunday said. “Immediate action is needed to curtail the intrinsically linked global debt and environmental crises”.
Boston University professor Kevin Gallagher said far more “ambition” was needed with the G20-led “Common Framework” default resolution programme, largely regarded as a flop since its creation a few years ago.
“We need carrots and sticks,” Gallagher said. “We need to give these countries breathing room,” Gallagher said.
The urgent call for action precedes the first meeting of the “Global Sovereign Debt Roundtable” in 2024, scheduled for next week.
In addition to expediting debt restructurings, countries should have the option to temporarily suspend debt payments before facing the risk of default.
Climate change stands out as one of the most urgent global challenges, with Africa emerging as the most susceptible continent to its impacts across various climate scenarios.
Chad, Niger and Guinea-Bissau are all highly vulnerable to global warming, whereas Cabo Verde, the Solomon Islands and Papua New Guinea all have huge conservation opportunities.
The urgency to provide debt relief is further heightened by the prospect of climate change doubter Donald Trump returning to power in the United States after the November elections.
“Trump has shown (during his first term) he can withdraw from an international treaty, but it would be hard to dismantle something if it was at the G20 level. That is why this is the year to lock this in,” Gallagher said.