Summary One complaint about the Bretton Woods Institutions’(BWI) debt sustainability frameworks that is strongly raised by International Monetary Fund(IMF) member states, academic and independent analysts, and civil society, is that they are not fully compatible with the National Sustainable Development Plans countries have adopted to reach Agenda 2030, or with the National Defined Contributions/National Adaptation Plans adopted to confront the climate crisis. Drawing on steps taken by the BWIs to adapt to the Sustainable Development Goals(SDGs), as well as independent methodologies developed by other analysts, this paper proposes ways in which debt sustainability analysis(DSA) methodologies could be more fully adapted to the SDGs. It begins by making the case for why such adaptation is urgently needed, and then deals with three issues: i) adapting DSAs to overall SDG spending needs; ii) adapting DSAs to urgent environmental crises(climate change adaptation, nature and biodiversity collapse, and natural disasters); and iii) adapting DSAs to urgent social crises(rising extreme inequality and poverty, and global pandemic health events). The paper pays particular attention to feasibility and ease of implementation of the proposed changes, so that they do not overburden BWI staff or government officials working on the analysis and are immediately practicable and actionable. They can therefore relatively easily be fed into the forthcoming review of the Low-Income Countries Debt Sustainability Framework(LIC-DSF), and of the Staff Guidance Note and tools for the Sovereign Risk and Debt Sustainability Framework(SRDSF) for Market Access Countries(MACs). The paper ends by urging that the reviews should emphasise the high positive multipliers SDG spending can have on growth and explore how they can be funded by enhancing non-debt and lower-cost financing. It also urges the BWIs to keep a much closer eye on total public(external and domestic) debt-service burdens to avoid crowding out key spending for the SDGs and to accelerate the provision of rapid liquidity relief on debt where needed.
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How to ensure debt sustainability accelerates susteinable development
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