The COVID-19 pandemic has put severe strain on the already stressed public finances of developing countries. The need for spending on health and welfare has not only led to increased borrowing, but also to deprioritising investment in addressing climate change and nature loss. Calls for additional debt relief are getting louder. To meet the multiple challenges of debt, climate change and biodiversity loss, a new model is needed.
Focusing on lessons from the Heavily Indebted Poor Countries (HIPC) Initiative, established 25 years ago by the World Bank and IMF, this paper proposes a new international debt relief initiative, which prioritises investment in climate and nature, to get developing countries’ economies back on track post-pandemic.