To promote a green and socially just recovery worldwide, public debt problems need to be urgently addressed to enable all governments to have the fiscal space to finance key health and social spending and invest in a green, resilient and inclusive recovery.
The publication presents the "Debt Relief for Green and Inclusive Recovery Initiative", a proposal that aims at freeing up resources to support recoveries in a sustainable way and in this way, boosting the resiliences of economies and fostering a just transition to a low-carbon economy.
In the report, it is proposed that governments receiving debt relief would need to commit to reforms that are in alignment with the goals and objectives of the 2030 Agenda for Sustainable Development and the Paris Agreement.
The proposal consists in three pillars:
Pillar 1: Comprehensive debt relief for eligible heavily indebted countries by public creditors that is analogous to, but improves upon, the HIPC Initiative.
Pillar 2: Private-sector involvement, with private creditors swapping their old debt holdings with a haircut for new «Green Recovery Bonds».
Pillar 3: Debt-for-climate or debt-for-sustainability swaps for countries that are not heavily indebted, but have reduced fiscal space due to COVID-19.