V20 Debt Review: An account of debt in the Vulnerable Group of Twenty

Emerging market and developing countries (EMDs) are struggling to cope with the persistent presence of the COVID-19 pandemic, the global ramifications of Russia’s war in Ukraine, a growing climate crisis and rapid interest rate increases in advanced economies. The Vulnerable Twenty (V20) Group of Finance Ministers includes 55 climate vulnerable economies. This group is at the epicenter of these crises which threaten their ability to mobilize the necessary resources to build resilient and low-carbon economies moving forward. Even prior to the pandemic, debt levels were climbing across developing countries. In the V20, total debt climbed from $464 billion in 2015 to $570 billion in 2018 and $686 billion in 2020. This comes at the same time that investments in sustainable infrastructure investments need to be scaled up by $3.2 trillion per year to meet the UN 2030 Sustainable Development Goals and to limit global warming to 2°C (Bhattacharya et al. 2019). In addition to other necessary global measures such as increasing the availability of global liquidity and insurance, the V20 released a statement calling for a global debt restructuring scheme (V20 2021) that would link debt relief to climate and development goals prior to the 2021 United Nations Climate Conference in Glasgow (COP26). To provide background on the scale, composition and distribution of V20 debt, this policy brief provides a detailed look at the V20’s debt profile. It identifies the creditors, their relative salience and trends in debt servicing costs. Understanding these components of the V20’s debt profile is crucial to devising a global debt workout and coordinated policy response that places climate change and vulnerable nations at the center.