Our new report performs an enhanced global external debt sustainability analysis (DSA) to estimate the extent to which EMDEs can mobilize the G20 Inde­pendent Expert Group recommended levels of external financing without jeopardizing debt sustainability.

It finds that of 66 eco­nomically vulnerable EMDEs, 47 EMDEs with a total population of over 1.11 billion people will face insolvency problems in the next five years if they seek to ramp up investment to meet climate and development goals.

Main findings:

• External Public and Publicly Guaranteed (PPG) debt levels have more than doubled since 2008. In terms of debt service payments, 2024 is the costliest debt service year yet this century.
• Debt service payments are at an all-time high and are crowding out investment in development and climate. Nearly half of the world’s population lives in a country that spends more on external debt service than on investments in health or education.
• Private capital markets are out of reach for the majority of EMDEs. With bond yields higher than projected growth rates, EMDEs cannot rely on capital markets to roll over or issue new debt without jeopardizing their debt sustainability.
• In the next five years, an estimated 47 EMDEs would surpass the International Monetary Fund’s (IMF) external debt solvency thresholds as they mobilize capital to meet 2030 Agenda and Paris Agreement needs. According to the enhanced global external DSA performed in this report, these EMDEs would reach unsustainable levels of external public debt by 2028 if they were to invest at the levels needed to meet internationally agreed climate and development goals.
• An additional 19 EMDEs lack liquidity and fiscal space for climate and development investment. While these countries will not likely face imminent insolvency issues, they will not be able to finance necessary investments without credit enhancement or liquidity support.

Read the summary of the key findings in this blog article.

There has been an increasing recognition of the vicious cycle of debt and climate change that many Global South countries are facing. A growing number of proposals have emerged to address these interconnected issues. But what are these proposals, and can they address the needs of Global South countries? Can Climate Resilient Debt Clauses or debt-for-climate/nature swaps help disrupt the vicious climate-debt cycle?

On Friday, April 19 from 4:00–5:30 PM EDT, join us for an official Civil Society Policy Forum event at the IMF/World Bank Group Spring Meetings to explore proposals for navigating the debt and climate crises.

The debt crisis has shifted from a potential threat to a stark reality in numerous countries. Elevated interest rates and debt servicing obligations are constricting fiscal space in global south nations, imperiling their capacity to allocate funds towards climate and development initiatives. It's imperative to address debt sustainability while safeguarding governments' abilities to uphold human rights, promote gender equality, and advance climate action.

Join us on Friday, April 19 from 11:30–13:00 PM EDT for this official Civil Society Policy Forum event at the IMF/World Bank Group Spring Meetings and learn about different strategies how to effectively solve the intertwined debt and development crisis.

The Debt Relief for a Green and Inclusive Recovery (DRGR) Project is pleased to announce the appointment of Bogolo Kenewendo and Dr. Patrick Njoroge as its newest Co-Chairs. Lern more about their background and expertise in this blog.