Poorest countries face rising cost of servicing debt in 2024, report says

Poorest countries face rising cost of servicing debt in 2024, report says

LONDON, Sept 23 (Reuters) – Some of the countries most vulnerable to climate change face a sharp rise in debt service payments over the next two years, hampering their ability to invest in climate protection and in strengthening their economies, according to a research report.

The Vulnerable Group of Twenty (V20) – a group of 55 economies exposed to the consequences of climate change – expects debt service payments to rise to $69 billion in 2024, the highest level in the current decade. , according to calculations by the V20 and the Center for Global Development Policy at Boston University.

Debt service payments in 2022 stand at $61.5 billion, and in 2023 they are projected to be slightly above that figure, according to the authors.

Emerging market and developing countries (EMDs) are struggling with the COVID-19 pandemic, Russia’s war in Ukraine, the climate crisis and rising interest rates in advanced economies, Luma Ramos wrote in the report. published on Friday.

After the pandemic roiled global financial markets and battered economies around the world, various debt relief schemes for the world’s poorest nations were launched.

However, progress has been slow and some of the plans, such as the Debt Service Suspension Initiative (DSSI), have expired.

“Without debt relief and other complementary measures, such as grants, V20 countries will postpone their ability to reap the benefits of climate investments, such as improved resilience and increased power generation through renewable energies”, adds the report.

Adding to the complexity is a change in the structure of the creditors of the 686.3 billion dollars of external public debt of the V20 countries.

According to the report, private creditors are now the largest group, holding more than a third of the debt, while the World Bank and other multilateral institutions hold a fifth each. The V20 countries owed 7% of the total to China, while 13% was owed to the rich creditor countries of the Paris Club.

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The authors also urged the International Monetary Fund to update its Debt Sustainability Analysis to take into account climate risks facing vulnerable nations.

“Given that climate impacts are increasing the cost of raising capital for vulnerable countries, the close relationship between climate change and debt sustainability needs to be captured and inform the discussion about countries in need of debt relief.” , the report concluded.

The V20 economies are Barbados, Cambodia, Costa Rica, Ethiopia, Honduras, Lebanon, Morocco, Nepal, the Philippines, Rwanda, Senegal, Sudan, Tanzania, Tunisia, Tuvalu, and Vietnam, among others.

(Reporting by Karin Strohecker; Editing in Spanish by Ricardo Figueroa)

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