A group of notable former finance ministers and central bankers from emerging markets is urging global leaders to consider external shocks and climate change in debt sustainability calculations, as highlighted in a letter.
Reuters reports that the signatories are mostly from emerging economies. They also called for debt relief to enable struggling emerging economies to meet climate investment targets.
It says, “The past few years have brought a dangerous mix of conflict, climate shocks, monetary tightening and a deadly pandemic that have led to historic levels of external public debt across the Global South.”
In the letter, Patrick Njoroge, former governor of Kenya’s central bank, said, “Every civilization faces what seems to be an impossible hurdle that threatens its existence.”
He added, “We face such a moment, given the global debt crisis and the limited space for the required investments in climate action and the Sustainable Development Goals.”
Read more: World Bank approves $1.2 billion budget support for Kenya to accelerate green policies
The World Bank has cautioned that high borrowing costs and sluggish economic growth have triggered a “silent debt crisis,” jeopardizing climate, health, and education spending objectives throughout the developing world.
Reuters reports that the 21 signatories included Nigeria’s Lamido Sanusi, Colombia’s Jose Antonio Ocampo, Pakistan’s Reza Baqir, Argentina’s Martin Guzman and South Africa’s Tito Mboweni.
The letter calls for the Common Framework to ensure that countries receive equitable and consistent debt relief from all creditors, with enough relief to enable them to address climate and investment spending requirements.
Meanwhile, the International Monetary Fund is undergoing a multi-year overhaul of its debt sustainability analysis methodology. This methodology is crucial for determining the amount of debt relief that lenders must provide to countries that have defaulted.
