Debt crisis

Across Africa, climate shocks and debt distress fuel each other in a vicious cycle. With external debt more than tripling since 2008, rising costs and plunging currencies are squeezing public finances - leaving little room for vital climate resilience investments. 

This policy brief details the challenging debt dynamics facing African nations and outlines several solutions that would improve their fiscal capacity to address the climate emergency and embark on a sustainable growth pathway.

As this report shows, many countries will face insolvency problems if they seek to ramp up investment to meet climate and development goals.

This paper reviews the main features of and experiences with the Brady Plan, which in 1989 laid the foundation for the restructuring of the sovereign debt of mainly Latin American countries. It argues that the combination of credit enhancement for restructured debt, moral suasion, and tax as well as regulatory relief to encourage private creditors to participate in debt restructurings may provide a template for addressing today's sovereign debt problems.