IMF and World Bank start pushing to swap debt relief for green projects | Voice of America
The idea of ââcanceling poor countries’ debt in exchange for “green” investments gained traction this week at the IMF and World Bank spring meetings, with concrete proposals expected in time for a global summit on the weather this fall.
Low-income countries face a double crisis – they are under pressure to repay their debt while facing environmental challenges.
This makes them “very, very vulnerable,” Kristalina Georgieva, managing director of the International Monetary Fund, said this week, adding that it was therefore “logical” for the world to pursue so-called “green debt swaps.”
A spokesperson for the World Bank underscored this point.
âThe COVID-19 crisis has made it much more difficult for developing countries to cope with the growing risks posed by climate changeâ and environmental disasters, said the spokesperson, who declined to be named.
With already tight budgets, these countries have had to resort to emergency financial assistance to cope with the severe consequences of the pandemic and the resulting economic crisis.
“By increasing the debt burden of governments – which were already at record levels on the eve of the crisis – it left them with fewer resources to invest in a recovery that will also put the planet on more sustainable bases,” he said. declared the spokesperson. AFP.
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 (Organization for Economic Co-operation and Development) – was launched this week to examine “creative options. to help countries tackle these concurrent issues. challenges, âsaid the World Bank spokesperson.
âThis work is only just beginning,â she said, âbut we believe that a proactive approach is essential: we need to take a close look at how potential solutions to climate and debt challenges can be integrated to resolve the main development issues of our time. “
While there is no timeline yet to announce concrete action, all parties involved are clearly pointing to the COP26 climate summit to be held in November in the Scottish city of Glasgow.
âWe will work with the World Bank. And by COP26, we will advance this option âof a debt swap, Georgieva said, adding that it will then be up to creditors and debtors to decide whether or not to participate.
For Thierry Deau, founder and CEO of the Parisian group Meridiam, specializing in the development and financing of infrastructure projects, if the green debt swap option is pursued, it must be linked to clear âconditionalitiesâ to guarantee this debt relief actually leads to the launch of green projects.
âThe primary responsibility for this debt relief lies with the countries that are on both sides,â he said. âThere is a lot of politeness on this subject, and I think we need to stop that and create real partnerships.â
The IMF and World Bank will also need to consider the plight of several island nations whose middle-income economies receive less economic support but face daunting environmental challenges.
Their economies heavily dependent on tourism have seen their incomes dry up as the coronavirus pandemic drastically restricts global travel.
At the same time, their low-lying territories are often 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 assistance.
She also pointed out that countries that initiate “green” projects may see the added benefit of increased employment.
âThere are opportunities for job creation,â she said. âJust take, for example, renewable energy – seven jobs for one in the traditional coal sector,â although training is required.
âLikewise, reforestation, dealing with land degradation, resilience to climate shocks, these are all labor intensive activities,â Georgieva said.
“Policy makers need to think about it now.”