DEBT RELIEF TO COMBAT CLIMATE CHANGE

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					DEBT RELIEF TO COMBAT
   CLIMATE CHANGE


  COMMONWEALTH SECRETARIAT AND
 ORGANISATION INTERNATIONALE DE LA
   FRANCOPHONIE JOINT MINISTERIAL
    FORUM ON DEBT SUSTAINABILITY
       MICHEL VAUGEOIS AND MATTHEW MARTIN
            DEBT RELIEF INTERNATIONAL
                     CONTEXT
• The need for developing countries to address issues of
  adapting to and mitigating climate change is both urgent
  and evident.
• Yet they have competing immediate development and
  poverty reduction expenditure demands, and have
  recently been faced with food, fuel and financial crises.
• To ensure adequate priority to funding the combat
  against climate change, they need additional financing
  from all possible sources.
• In that context, the objective of this study is to assess the
  feasibility of an initiative aiming to mobilize additional
  financing for climate adaptation for countries
  participating in the Commonwealth-OIF Debt
  Sustainability Forum meeting, through debt relief and
  conversion.
         INTRODUCTION
• DEBT RELIEF AND DEBT CONVERSION
  PROGRAMMES
• OPTIONS FOR DEBT RELIEF TO COMBAT
  CLIMATE CHANGE
• ELIGIBLE FOR DEBT RELIEF
• FUNDING NEEDS FOR CLIMATE CHANGE
  AND DEBT SUSTAINABILITY
• FEASIBILITY OF DEBT RELIEF TO COMBAT
  CLIMATE CHANGE
• NEXT STEPS
     DEBT RELIEF AND DEBT
   CONVERSION PROGRAMMES
• DEBT RELIEF IS A TRIED AND TESTED
  MECHANISM FOR DELIVERING RAPID,
  PREDICTABLE AND OFTEN ADDITIONAL
  DEVELOPMENT FINANCING
• DEBT RELIEF ALLOWS ODA BUDGET TO
  SUPPORT PRIORITIES IN NATIONAL
  DEVELOPMENT STRATEGIES (POVERTY
  PROGRAMS WITH HIPC AND MDRI)
• DEBT CONVERSION HAVE SUPPORTED
  DEVELOPMENT PROGRAMS, NOTABLY,
  ENVIRONMENT (THROUGH DEBT FOR
  NATURE SWAPS)
OPTIONS FOR DEBT RELIEF TO
 COMBAT CLIMATE CHANGE
• COMMERCIAL DEBT: COULD BE PURCHASED AT A
  DISCOUNT IN THE SECONDARY MARKET OR
  DONATED AND CONVERTED INTO LOCAL
  CURRENCY TO COMBAT CLIMATE CHANGE
• BILATERAL DEBT: DIFFERENT MECHANISMS
  COULD BE USED (CANCELLATION OR
  CONVERSION) WITH SAVINGS OR PROCEEDS TO
  BE INVESTED TO COMBAT CLIMATE CHANGE
• MULTILATERAL DEBT: HIPC/MDRI STYLE
  CANCELLATION FUNDED BY GRANTS. LIBERATED
  FUNDS TO BE INVESTED TO COMBAT CLIMATE
  CHANGE
  ELIGIBLE DEBT FOR DEBT
         RELIEF (1)
• METHODOLOGY
 – 58 COUNTRIES SELECTED
 – 37 HIPC COUNTRIES
 – 11 LOW INCOME COUNTRIES OR LIC (IDA
   ONLY)
 – 10 LOW MIDDLE INCOME COUNTRIES OR
   LMIC
    ELIGIBLE DEBT FOR DEBT
           RELIEF (2)
• COMMERCIAL DEBT RELIEF WOULD BE LARGELY
  CONFINED TO LMICs and LICs (USD 14 BILLION).
  FOR HIPC, NEED TO BE INCLUDED IN IDA DEBT
  REDUCTION MECHANISMS
• PARIS CLUB BILATERAL DEBT WOULD APPLY
  LARGELY TO LICs and LMICs (USD 40 BILLION OF
  WHICH 30 BILLION MIGHT BE CONVERTIBLE)
• MULTILATERAL DEBT WOULD APPLY TO HIPC, LIC
  AND LMIC AND COULD REACH USD 90 BILLION,
  PARTICULARLY IF MDRI CUT OFF DATE WERE
  MOVED, MORE INSTITUTIONS WOULD PARTICIPATE
  AND ELIGIBILITY WIDEN TO LICs and LMICs
   ELIGIBLE DEBT FOR DEBT
          RELIEF (3)
• PRINCIPLES
 – RELIEF NEEDS TO BE PROVIDED TO A
   GROUP OF DEBTORS GOING BEYOND
   HIPC
 – FOR HIPC COUNTRIES, RELIEF WOULD
   NEED TO BE APPLIED TO CREDITORS
   THAT HAVE NOT PARTICIPATED IN
   INITIATIVE OR DEBT CATEGORIES THAT
   HAVE BEEN EXCLUDED
   FUNDING NEEDS FOR CLIMATE
 CHANGE AND DEBT SUSTAINABILITY

• GLOBAL FINANCING GAP ESTIMATED AT
  USD 120-200 BILLION
• ALL 58 COUNTRIES AFFECTED BY CLIMATE
  CHANGE (DEFORESTATION,
  DESERTIFICATION, SEA LEVEL RISE) WITH
  NEGATIVE IMPACTS ON GROWTH AND
  POVERTY REDUCTION
• 30 OF THE 58 COUNTRIES HAVE
  UNSUSTAINABLE DEBT, OR MODERATE, OR
  HIGHER RISK OF DEBT DISTRESS
 FEASIBILITY OF DEBT RELIEF
TO COMBAT CLIMATE CHANGE
• TECHNICAL FEASIBILITY: KNOWN MECHANISMS.
  KEY CHALLENGE IS POLITICAL
• PROSPECTS FOR CREDITOR/DONOR
  PARTICIPATION
  – CREDITORS/DONORS WILLING TO PARTICIPATE
  – CREDITORS/DONORS WILLING TO CANCEL OR CONVERT
    THEIR OWN DEBT
  – CREDITORS/DONORS SUFFERING FROM DEBT RELIEF
    FATIGUE
• PROSPECT FOR DEBTOR PARTICIPATION:
  ADDITIONNAL FUNDING FOR DEVELOPMENT, NOT
  DAMAGE ACCESS TO MARKET-BASE FUNDING,
  AND NO ADDITIONNAL CONDITIONALITIES
            NEXT STEPS
• MINISTERS NEED TO DETERMINE WHETHER THEY
  WISH TO EXPLORE PROSPECTS FOR DEBT RELIEF
  TO COMBAT CLIMATE CHANGE
• MANDATE THE CO-CHAIRS TO CONDUCT FURTHER
  DISCUSSIONS WITH DONORS/CREDITORS, CIVIL
  SOCIETY ORGANISATIONS, INTERNATIONAL
  ORGANISATIONS
• REQUEST COMMONWEALTH SECRETARIAT/OIF TO
  COMMISSION FURTHER ANALYSIS TO IDENTIFY
  MORE PRECISELY ELIGIBLE DEBT SO AS TO
  DETERMINE MORE PRECISELY THE SCOPE OF
  DEBT RELIEF
• REQUEST THE FINALISATION OF A PROPOSAL FOR
  DEBT RELIEF TO COMBAT CLIMATE CHANGE TO BE
  PRESENTED TO G8 MEETING