Sustainable Debt Coalition

History

The Coalition was launched by Egypt’s Ministry of Finance at COP27 in Sharm El Sheikh.

• 09/2022 | Conceived by Ministers of Finance, Economy, and Environment at the 2022 International Cooperation Forum. Cairo, Egypt.
• 11/2022 | Launched by Egypt and partners on Finance Day at COP27. Sharm El Sheikh, Egypt.
• 03/2023 | Endorsed by African Finance Ministers through the 2023 Conference of Ministers of UNECA. UNECA requested to serve as temporary secretariat. Addis Ababa, Ethiopia.
• Upcoming 09/2023 | Inaugural Convention of the Coalition. Cairo, Egypt.

Focus

The Coalition aims to increase finance for sustainable development by reforming the international debt architecture.

In doing so, it considers the management of existing debt, issuance of new debt, and alternatives to debt.

Members see climate change and public debt as interconnected:

• Higher public debt limits affordable financing access and constrains sovereign capacity to address climate change and development issues.
• Increased climate change exacerbates environmental, economic, and social pressures (including through increased natural disasters), undermining a nation’s ability to repay debts

Topics for discussion

Early work of the Coalition highlights preliminary solutions to explore together.

• Borrower-defined Key Performance Indicators, linked to climate and SDGs, to improve ownership of sustainable development, and improve financing terms,
• Climate contingency clauses (‘hurricane clauses’) which allow debt repayments to be frozen in the event of exogenous shocks associated with climate-related disasters,
• Coordination and upscaling of blended finance instruments to crowd-in private sector capital and reduce perceived risks for investing in emerging markets,
• The Sustainable Budgeting Approach for formulating and implementing budgets so they consider and advance economic, social, and environmental objectives,
• Prioritization of grant finance over debt finance to support sustainable development, and
• Debt swaps and other instruments for collaboration on debt refinancing, where appropriate, with a focus on making debt more affordable, and investing savings into climate resilience and the SDGs.