At this year’s IMF-World Bank Spring Meetings, calls for meaningful debt relief echoed loudly—but the official response remained stuck on fiscal tightening. As emerging market and developing economies face shrinking fiscal space and growing debt burdens, the gap between policy advice and economic reality is widening, with one crucial issue largely absent: the growing threat of climate change to debt sustainability.
BY SARAH RIBBERT (PROJECT COORDINATOR)
Dear Reader,
The 2025 International Monetary Fund (IMF)/World Bank Group Spring Meetings unfolded against a backdrop of deepening financial volatility, rising global trade tensions, and an increasingly fragile outlook for emerging market and developing economies (EMDE). For the world’s most vulnerable economies—many still struggling with the aftershocks of the COVID-19 pandemic—this year’s IMF/World Bank Spring Meetings underscored both the urgency of comprehensive debt relief and the need to make the financial architecture future-proof.
Rising Debt, Shrinking Fiscal Space
In her curtain-raiser speech, IMF Managing Director Kristalina Georgieva warned of the dangers facing emerging market and developing economies (EMDEs), who are grappling with tighter financial conditions, shrinking aid inflows, and exposure to new trade barriers. The IMF projects in its world economic outlook that public debt in EMDE will rise from its current level of 70 percent of GDP to 83 percent in 2030.
The G24 echoed these concerns in their communiqué, highlighting how mounting debt burdens “exacerbate external, fiscal, and debt vulnerabilities, jeopardizing financial stability and hindering economic progress.” Yet the IMF’s policy advice still leans heavily on fiscal consolidation, calling on countries to “put their own fiscal house in order.” While sound fiscal management and domestic resource mobilization are important, this framing neglects a critical reality: an increasing number of countries—particularly in Africa—cannot create the necessary fiscal space without reduced costs of capital and debt relief. As former Nigerian President Olusegun Obasanjo recently wrote in a Project Syndicate op-ed, many African nations are forced to borrow at punitive rates to cope with crises they did not create, resulting in debt service eclipsing social spending on health, education, and development priorities.
The Struggle for Fairer Debt Restructuring
Against this challenging backdrop, the DRGR Project co-hosted a side event at the Spring Meetings, featuring World Bank Chief Economist Indermit Gill and other experts. Indermit Gill outlined three key areas where the World Bank is seeking improvements: Debt transparency—including more complete reporting on domestic debt; an enhanced debt sustainability analysis (DSA) framework; and strengthened mechanisms for debt restructuring.
The event also featured HE Prof. Yemi Osinbajo, former Vice-President of Nigeria and one of the founding members of the newly created “African Leaders Debt Relief Initiative” (ALDRI). He and other speakers emphasized that existing mechanisms, like the G20’s Common Framework, are insufficient. They often exclude middle-income countries and lack effective participation from private creditors, leading to protracted and ineffective debt restructuring processes.
Global Sovereign Debt Roundtable yields a Restructuring Playbook, but not much progress
One of the key tasks of the Global Sovereign Debt Roundtable (GSDR) is to improve the restructuring process. While the fourth Co-Chairs’ Progress Report does not offer much new insights into this, a new “Restructuring Playbook” aims to improve clarity around debt restructuring processes for debtor countries—a welcome step toward greater transparency. However, it falls short by failing to clarify the responsibilities of creditor countries and private lenders, an omission that will limit its impact unless addressed in future reforms. In this context, the idea of a “debtor or South club” aiming to improve coordination and knowledge sharing between borrowing countries is increasingly gaining support.
The Missing Climate Link
Notably absent in public statements was the need to step up the Fund’s
and World Bank’s work on climate. In the area of sovereign debt, this
includes the reform of the IMF–World Bank Debt Sustainability Framework
(DSF). The DRGR Project has long called for a DSF that fully integrates climate- and nature-related risks, alongside countries’ critical investment needs for sustainable development. This recommendation was also central to the final report of the Expert Review on Debt, Nature and Climate, which was presented in Washington during the Meetings.
In a world where climate change is increasingly recognized as a macro-critical issue, integrating climate risks into debt analysis is not optional—it is essential. Despite potential political headwinds, including skepticism from some major shareholders, the IMF and World Bank must adapt their frameworks to reflect the true risks countries face.
What’s Next: The Road to Financing for Development
Looking ahead, momentum for sovereign debt reform is building despite all challenges. The coming months will see the release of the Jubilee Commission’s report, chaired by Nobel Laureate Joseph Stiglitz, which will offer proposals for a fairer international financial system. Parallel to this, the Africa Expert Panel, under South Africa’s G20 Presidency and chaired by Trevor Manuel, continues to drive forward African-led debt solutions. Meanwhile, the UN High-Level Expert Group is preparing key recommendations to inform preparations for the Fourth International Conference on Financing for Development (FfD4).
As delegates gather for the third preparatory meeting in New York, hopes are high that debt sustainability—and broader reforms to global lending and debt resolution frameworks—will feature prominently at FfD4. A development-focused outcome is urgently needed to ensure that sovereign debt does not continue to be a barrier to growth, resilience, and a just green transition.
Thanks for reading, and until next time.
Drop us a line with your thoughts: ribbert@boell.de