Hurley, Gail and Wilkinson, Emily and Aitken, Damon (2025) Tackling the ‘cost of capital’ crisis in small vulnerable nations. p. 25.
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This policy brief draws on earlier work by the Resilient and Sustainable Islands Initiative (RESI) on debt sustainability in Small Island Developing States (SIDS) (Hurley et al., 2024). The study notes that despite differences between individual SIDS and across regions, SIDS as a group face some of the highest debt burdens of all groups of developing countries. This is in part due to difficulties in accessing concessional finance. Overall, SIDS are highly dependent on official development assistance (ODA), but several are no longer eligible, and the number of these ineligible states is growing.1 The study finds that, unlike for other countries – where external shocks tend to cause liquidity problems – in SIDS, repeated and intensifying climate shocks are creating problems of longer-term debt sustainability. This is compounded by SIDS’ high cost of capital for financing relief and recovery, as well as for longer-term development. Importantly, SIDS’ debt problems are little to do with fiscal profligacy or poor public debt management, and hence there is a clear ethical argument for the provision of tailored support to SIDS, including minimum annual climate finance allocations for SIDS (and other vulnerable countries), scaling up the use of climate-resilient debt clauses (CDRCs), introducing SIDS-specific debt relief mechanisms in the event of large climate-related shocks, and actions to make borrowing more affordable for SIDS – as well as the creation of a well-funded debt sustainability support service for SIDS.
| Item Type: | Articles |
|---|---|
| Keywords: | RESI, Small Island Developing States (SIDS), Official Development Assistance (ODA), Sustainable Development Goals (SDGs), Capacity Building, Climate Resilient Debt Clauses (CDRCs) |
| Subjects: | Right to Resources |
| Depositing User: | Kokila ICSF Krish |
| Date Deposited: | 23 Jun 2025 10:15 |
| Last Modified: | 23 Jun 2025 10:15 |
| URI: | http://icsfarchives.net/id/eprint/21873 |
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