Economy1 hour ago (Apr 07, 2021 06: 45PM ET)
© Reuters. FILE PHOTO: International Monetary Fund emblem is seen in the headquarters in the conclusion of their IMF/World Bank annual meetings
By Andrea Shalal
WASHINGTON (Reuters) – The World Bank and the International Monetary Fund intend to launch a stage to advise poor nations on funding climate and conservation actions, amid a broader push that may link such spending to debt relief, according to a draft document seen by Reuters.
The advisors would include U.N. officials, nongovernmental organizations, private investors and even evaluations agencies with expertise in sourcing investment, including grants, low- or no-interest loans and conditional debt relief, the document states.
The initiative reflects growing recognition that the economic chaos of this COVID-19 pandemic has exacerbated budget limitations and debt challenges that hamper the ability of some states to transition to clean energy, protect wildlife or create infrastructural modifications to get ready for climate influences.
“Unlike other initiatives out there that focus on one project at a time, this will focus on systematically changing whole economies,” said one source familiar with the initiative, who added that the stage aims to get a more holistic approach to”the triple crisis of debt, climate change and biodiversity loss.”
In a February interview, World Bank President David Malpass raised the possibility of linking debt relief with investments to combat climate change and reduce fossil-fuel emissions, but provided no further details.
The institutions’ discussions toward that goal are detailed in a World Bank paper on debt published on the bank’s website on Monday for their annual spring meetings.
It said they are developing an”organizing framework” for connecting debt relief to countries’ plans for investing in”green, resilient and inclusive development,” or GRID — the bank’s newest catchall acronym.
“For countries that are close to their debt limits, financing GRID will require sufficient grants and concessional lending which could be augmented by conditional debt relief or reprofiling,” the joint paper stated.
The World Bank estimates that over 30 of the planet’s poorest countries are in or at high risk of debt distress. Three of them – Chad, Ethiopia and Zambia – have requested restructuring of the debts under a frequent framework agreed last year by China, the world’s largest bilateral creditor, and other Group of 20 significant markets using the Paris Club of official creditors.
Last month, a separate technical working group began working on the new Debt/Climate/Nature Platform. It will allow public and private sector experts to give technical assistance and information to countries about possible investments and let them locate private and public financing, the newspaper said.
A second source said planning was in the early phases, but the goal was to start the stage in 2021, with a secretariat to be hosted at the World Bank.
“If unaddressed, or approached in ways that do not take into account macroeconomic vulnerabilities and debt sustainability constraints, climate change and nature loss represent a systemic risk to the global economy,” the newspaper states.
The platform, however, wouldn’t replace debt therapy talks under the Group of 20 shared frame, the record said. Instead, it could offer advice for how to move after any debt relief was agreed.
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