A higher cost of capital impeded investment in development and resilience A higher cost of sovereign debt has a broad impact on an economy as it also raises the cost of capital that the private sector has to pay.4 The worsening of both public and private financing 1 See Volz and Ahmed (2020), Macrofinancial Risks in Climate Vulnerable Developing Countries and the Role of the IMF – Towards a Joint. [...] An example of such a proposal includes the Guarantee Facility for Green and Inclusive Recovery managed by the World Bank.6 As proposed by the Task Force on Climate, Development and the International Monetary Fund7, the IMF is encouraged to play a strategic role through the new Resilience and Sustainability Trust in debt restructuring by providing collateral to guarantee restructured debt. [...] Debt Sustainability Analyses need to account for climate and other sustainability risks and spending needs for climate action and achieving SDGs Climate vulnerable countries need comprehensive, enhanced Debt Sustainability Analyses for low-income and middle-income economies conducted by the IMF and the World Bank that integrate climate and other sustainability risks, climate resilience benefits, a. [...] 7 The Task Force on Climate, Development and the International Monetary Fund is a consortium of experts from around the world convened to support the Intergovernmental Group of Twenty-Four and the Vulnerable Group of Twenty Ministers of Finance. [...] The mediator would chair the stakeholder hearings regarding the first draft of the Climate Prosperity Plan, broker the conversations on the Climate Prosperity Plan between debtor countries and creditors (including the IMF and the World Bank), and chair the steering committee to supervise the implementation of the Climate Prosperity Plans.
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