Avoiding the Climate-Debt Spiral: The Role of the IMF and FfD4

Public debt levels and situations of debt distress have significantly increased since the Third International Conference on Financing for Development, with the growing impacts of climate change on debt one cause of this worrying trend.

Meeting climate mitigation and adaptation investment needs requires additional investments that debt-constrained countries struggle to make, while failing to make these investments increases the size of future damages that will jeopardize countries’ debt sustainability. These climate risks can increase countries’ cost of borrowing, further exacerbating debt challenges. While debt relief is part of the solution, managing this potential climate-debt spiral will require broader reforms to the sovereign debt, development finance and financial stability architecture, with the International Monetary Fund (IMF)’s surveillance, lending and coordination playing a central role in this global effort.

Apart from a brief mention in paragraph 102, the Addis Ababa Action Agenda did not address the intersection of climate change and debt, making it essential that FfD 4 advances solutions for this increasingly important issue. This panel will synthesize topical research from the Task Force on Climate, Development and the IMF, a consortium of experts from around the world utilizing rigorous, empirical research to advance a development-centered approach to climate change at the IMF.

On Monday, December 2 from 11:30-12:45PM, join us for a panel event at the Financing for Development Dialogues: From Evidence to Action on avoiding the climate-debt spiral. The panel will outline the findings of this research and make tailored recommendations for how FfD 4 can address the intersection of climate change and debt.

Speakers:

- Jwala Rambarran, Senior Advisor, Financial Futures Center

- Marilou Uy, Non-Resident Senior Fellow, Boston University Global Development Policy Center

- Daniel Titelman, Director, Economic Development Division, United Nations Economic Commission for Latin America and the Caribbean

- Tim Hirschel-Burns (Moderator), Policy Liaison, Boston University Global Development Policy Center