C. P. Chandrasekhar’s Blog

Early in 2024, the World Bank in its flagship report Global Economic Prospects, put out a message of gloom. This year could end marking “a wretched milestone: the weakest global growth performance of any half-decade since the 1990s”. Between 2021, when the world economy showed signs of recovering from the troughs of the pandemic, and 2023, growth has been decelerating almost everywhere, with the figures at 6.2, 3.0 and 2.6 per cent for the world as a whole in 2021, 2022 and 2023 respectively (Chart 1). For most advanced economies growth in 2023 was below the average recorded during the…

The recent collapse of the protracted negotiations to restructure Zambia’s external debt, following a default in November 2020, underlines the failure of the prevailing international financial architecture to address global challenges. Not only has the structure not been adapted to the realities of a changing international order, but it binds the less developed countries into accepting the IMF as the principal agent to manage balance of payments difficulties and address debt stress, on behalf of both creditors and debtors. But the claim of the IMF to being a neutral arbitrator has long been in question. The Zambian experience suggests that…

Following the COP28 Summit, there is an attempt to establish that the conference was a significant step forward in the effort to address the causes and consequences of climate change. However, a reading of the actual outcome only illustrates how the resistance of the developed countries to own up to their historical responsibility as emitters is stalling the effort to combat climate change and manage the consequences of the changes already underway. The COP process is ostensibly concerned with the global effort to move from an unsustainable trajectory to an acceptable one in terms of the ceiling on long-term warming…

Abstract On April 12, 2022, Sri Lanka defaulted on external debt service commitments. Announcing the “pre-emptive default”, pending restructuring, the government also announced that it was suspending repayments due in 2022 on its external debt. By May, Sri Lanka was formally in default, becoming the first country in the Asia-Pacific region to default on debt in two decades. There were medium-term factors that underlay the crisis, not least of which was the chronic dependence on foreign finance, especially debt, to cover widening current account deficits that followed the IMF-inspired and dictated embrace of liberalization policies starting in the late 1970s.…

The world’s leaders and their representatives meet in Dubai in December to revisit the climate challenge. Information to facilitate those discussions is not wanting. A plethora of reports, from official and private sources, covering diverse issues have been released in the run up to the summit, which lay out the policies that must be implemented to stay within the acceptable range of global warming between 1.5 and 2°C. Indications are that discussions at Dubai would focus largely on the how far nations can and will go to phase out fossil fuels. That issue is no doubt paramount, given the disproportionate…

Early October provided yet more evidence of the breakdown of multilateralism and the lack of international commitment from countries, to work together to address shared national challenges. The 2023 pledging Conference for the second replenishment of the Green Climate Fund, the largest climate-dedicated multilateral funding source, generated only $9.3 billion of commitments from 24 countries. That is lower than $10.3 billion pledged by 45 countries when the fund was created in 2014, and $10 billion committed by 32 countries during the first replenishment in 2019. This failure to mobilise even a nominally higher sum for the second replenishment for the…

Unlike many low- and middle-income countries (LMICs), the Indian economy is not characterised by external debt stress or distress that could lead to default. It does record almost consistent current account deficits on the balance of payments, but these are not at unsustainable levels. They can be easily financed with ‘normal’ net capital inflows. Given the recent spate of external shocks affecting all countries, inflicted by the COVID pandemic and speculative increases in global oil and food prices, this is surprising. This is especially so, because India is not among the developing countries that have successfully diversified into manufacturing exports…

In the fringes of the opaque world of “innovative finance,” there is much excitement over recent efforts to swap the distressed foreign debt of less developed governments in return for a promise to protect biodiversity or “green the economy.” The excitement stems not the least from the fact that though debt-for-nature swaps had been experimented with as far back as the 1980s, only to lose momentum, there has been a sudden spate in such deals in recent times Belize concluded a deal in 2021 (involving bonds valued originally at $553 billion); Barbados struck a deal to buy back a fraction,…

As news broke that the monsoon month August was the driest since 1901, when records began to be kept, fears of inflation gathered strength. At 161.7 mm across the country, rainfall that month was well below the previous record low of 191.2 mm recorded in 1905. This August’s 36 per cent deficiency in rainfall relative to normal comes after shortfalls of 9 and 13 per cent shortfalls in June and July. So, the projection is that the overall monsoon would be well below normal. That could imply that the level of agricultural, especially food grain, production, which has been reasonable…

On July 14 this year, the shaky government of a debt-stressed Pakistan, won itself a surprising reprieve. The country had experienced a collapse in foreign reserves to less than one month worth of imports and was on the verge of defaulting on its external debt of more than $120 billion. The government had been in negotiations for months with the IMF for the release of a tranche of $1.1 billion out of a $7 billion loan programme, which had stalled because of failure to meet IMF conditions. But in a turnaround, the IMF has now granted Pakistan a larger-than expected,…