Rising interest rates are pushing low-income, climate-vulnerable countries into debt distress, making it even more challenging for their governments to invest in conservation and decarbonization. But innovative financial solutions like debt-for-nature swaps could help alleviate debt burdens while strengthening climate resilience.
CAIRO – The sharp, almost synchronized, pivot by most of the world’s major central banks in raising interest rates has highlighted the growth-inflation trade-off that most countries now face. But it has given rise to another significant macroeconomic challenge – the Herculean task of balancing debt sustainability with climate-change mitigation and adaptation. The challenge is especially formidable in the Global South, where the rising cost of servicing external debts has reduced countries’ fiscal space and ability to pursue climate action.
CAIRO – The sharp, almost synchronized, pivot by most of the world’s major central banks in raising interest rates has highlighted the growth-inflation trade-off that most countries now face. But it has given rise to another significant macroeconomic challenge – the Herculean task of balancing debt sustainability with climate-change mitigation and adaptation. The challenge is especially formidable in the Global South, where the rising cost of servicing external debts has reduced countries’ fiscal space and ability to pursue climate action.