Climate needs and debt to hit lower-income states hard

Significance

Debt distress is related to both global financial conditions -- such as the strength of the US dollar -- and growing climate vulnerabilities. Greater attention and funding to these issues would minimise global ripple effects and support equitable, long-term development.

Impacts

• Far less private finance than needed will flow to developing states with shallow domestic capital pools and high political and macro risk.
• Debt restructuring is likely to be more difficult for countries which owe a sizable share of their debt to private bondholders.
• Multilateral development banks will be pivotal institutions in the discussion around climate finance, including local currency lending.