“We need to mobilise more capital and bend down the cost of capital for countries if we’re going to have any prayer to meet this,” Gallagher told Reuters.
The DRGR Project is collaboration between the Boston University Global Development Policy Center, Heinrich-Böll-Stiftung, the Centre for Sustainable Finance, SOAS and the University of London.
The report also presses the IMF to rejig the way it calculates debt sustainability – arcane-sounding assessments that are crucial to determining how much debt relief defaulted countries get.
If the IMF determines a country can handle an amount of debt that is too high, it can saddle the nation with unaffordable payments – possibly pushing them back into default.
Private creditors, however, have at times criticised the Fund’s analyses for being too pessimistic, making them closely watched and politically charged.
The DRGR says the IMF, which is conducting a years-long review of the analyses, must incorporate climate spending needs – as well buffers to weather shocks, from climate to economic crises to pandemics.
“If the international community does not act in a swift and uniform manner to provide comprehensive debt relief where needed alongside new liquidity, grants and concessional development finance, the costs of inaction will be exorbitant,” the report warned.
