New economic support service for Small Island Developing States: a "clarion call" for action on debt and financial resilience

A new plan aimed at alleviating crippling levels of debt and building economic resilience among Small Island Developing States (SIDS) will today be launched by the leaders of Antigua and Barbuda and the Maldives.

Press release, 28 May 2024

The Global SIDS Debt Sustainability Support Service has been co-designed by IIED in close consultation with a panel of country leaders and industry representatives, including from the World Bank, Net Zero Lawyers Alliance, the Commonwealth Secretariat and Willis Towers Watson.

The support service would provide strategic advice on breaking the cycle of debt and options for supporting new investment in climate-resilient infrastructure.

Escalating levels of debt are compromising the financial stability of SIDS countries. More than 40% of SIDS are nearing or already in debt distress, and an alarming 70% surpass the debt-to-GDP sustainability threshold of 40%.

This situation is diverting money from essential infrastructure and resilience building efforts into debt servicing.

The proposed support service recognises the unique social, economic and environmental challenges facing SIDS countries. It involves four key elements:

  1. A multi-layered approach to debt sustainability to free up fiscal space for climate-resilient infrastructure investment. IIED analysis shows that rethinking debt relief measures could slash debt burdens by more than 40%, which would in turn help boost economic growth
  2. Protection measures against future economic threats, such as climate-induced economic shocks. By combining insurance with other funding mechanisms, SIDS would have a new layer of financial stability
  3. Fostering climate-resilient infrastructure investment through the issuance of bonds, to diversify the financing toolkit available to SIDS countries, and
  4. The provision of expert advisory and legal support, given that many SIDS countries are disadvantaged because of their limited capacity to navigate international debt and finance negotiations.  

The proposal is being launched at the 4th International Conference on Small Island Developing States being held in Antigua and Barbuda.

The SIDS represent approximately 1% of the world’s population. However these countries are at the forefront of multiple global crises, notably climate change.

IIED principal Researcher Ritu Bharadwaj, who led the design work, said: “For too long, Small Island Developing States have been caught in a vicious cycle of borrowing more and more money to pay for climate-related disasters that are not of their own making.

“Sometimes the cost of these disasters can be more than the affected country’s annual GDP.

“It’s time to stop trying Band-Aid solutions. These countries need holistic support to break free from their long-term economic challenges.

“The Global SIDS Debt Sustainability Support Service is designed to help deal with the full suite of financial issues facing these countries. This proposal has the potential to transform the economic future of these developing countries by breaking the cycle of debt and building resilient prosperity for their citizens.”

The expert panel was co-chaired by the prime minister of Antigua and Barbuda and the president of the Republic of Maldives.

Antigua and Barbud prime minister Gaston Browne said: “The Global SIDS Debt Sustainability Support Service stands as a crucial initiative in our ongoing struggle to build resilience against these relentless challenges.

“This service is a clarion call to action, uniting SIDS around a common strategy for prosperity and resilience in the face of adversity.

“The Global SIDS Debt Sustainability Support Service is not merely a response to our current fiscal and environmental crises – it is a proactive strategy aimed at ensuring the long-term sustainability and self-sufficiency of SIDS.”

Republic of Maldives president Dr Mohamed Muizzu said: “Small Island Developing States are facing treacherous conditions every day as we try to thrive in a world where we are among the worst affected by external shocks, including climate change and conflicts – despite contributing the least to them.

“The Fourth International Conference on Small Island Developing States represents a pivotal moment in our collective journey towards a more resilient and sustainable future for SIDS. It is a moment for us to come together and reflect on what we are trying to achieve and what the international community can do for SIDS.”

The next stage of the plan involves SIDS leaders deciding how best to set up the service, with the idea that it could be in place as early as 2025.

For more information or to request an interview, contact Simon Cullen: 
+44 7503 643332 or [email protected]