Debt Relief for Resilience

The report argues that low-income countries face a systemic balance of payments crisis rather than a simple liquidity or solvency problem, driven by a rise in expensive, short-maturity non-guaranteed private debt and reversed capital flows. It proposes the Debt for Resilience (D4R) initiative, which would provide a standardized 50% reduction in the net present value (NPV) of official bilateral and multilateral debt for IDA-eligible countries. Participation would be contingent on an active IMF program and the development of nationally determined growth plans supported by the United Nations and World Bank to avoid austerity. The report also evaluates existing proposals like the Bridge Initiative and the Debt Relief for a Green and Inclusive Recovery (DRGR), arguing they rely on a flawed binary between liquidity and solvency and fail to account for the heterogeneity of countries' credit compositions.

• IDA-eligible countries are experiencing acute balance of payments pressures and external debt vulnerabilities, which the authors argue is a systemic problem rather than a mere liquidity issue.
• A significant driver of current debt distress is the rise of non-guaranteed private debt, which is more expensive and has shorter maturities than public and publicly guaranteed (PPG) debt.
• The proposed Debt for Resilience (D4R) initiative would provide a standardized 50% reduction in the net present value (NPV) of official bilateral and multilateral debt for eligible countries.
• Participation in the D4R initiative is contingent upon an active IMF program and the creation of nationally determined growth plans developed with the United Nations and World Bank to prevent austerity.
• To prevent the 'leakage' of official debt relief to private creditors, the D4R initiative proposes complementary measures including capital flow management (CFM) and private debt restructuring on a case-by-case basis.
• The authors critique the Bridge Initiative and the Debt Relief for a Green and Inclusive Recovery (DRGR) for relying on an impractical binary distinction between liquidity and solvency.
• There is significant heterogeneity in credit composition among IDA-eligible countries; for example, 43 out of 73 countries in the IDS database had more than 90% of their debt with official creditors in 2023.
• The report identifies two necessary conditions for any debt relief initiative: the 'creditor requirement' (fairness and alignment with bilateral official creditors' interests) and the 'debtor requirement' (net benefit to the debtor).

APA

Horas, Y., Morra, F., & Wiedenbrüg, A. (2025). Debt Relief for Resilience. International Institute for Sustainable Development. https://www.iisd.org/system/files/2025-04/debt-relief-for-resilience.pdf

Chicago

Horas, Yanne, Fernando Morra, and Anahí Wiedenbrüg. Debt Relief for Resilience. International Institute for Sustainable Development, 2025. https://www.iisd.org/system/files/2025-04/debt-relief-for-resilience.pdf.

Wikipedia

{{cite report |last1=Horas |first1=Yanne |last2=Morra |first2=Fernando |last3=Wiedenbrüg |first3=Anahí |title=Debt Relief for Resilience |publisher=International Institute for Sustainable Development |date=April 2025 |url=https://www.iisd.org/system/files/2025-04/debt-relief-for-resilience.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{horas2025debt, author = {Horas, Yanne and Morra, Fernando and Wiedenbrüg, Anahí}, title = {{Debt Relief for Resilience}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = apr, url = {https://www.iisd.org/system/files/2025-04/debt-relief-for-resilience.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }