2023-Public-Sector-Perspectives

Hanan Amin-Salem Global Co-Head Sovereign Advisory and Solutions, Citi Cindy Morand Global Sovereign Advisory and Solutions, Public Sector, Citi Debt-For-Sustainability: Addressing Debt Pressures and Achieving SDG Goals G lobal debt levels remain elevated, standing at US$290 trillion as of Q3 2022 1 . A significant surge in the accumulation of this debt occurred after the onset of the COVID-19 pandemic in 2020. In large part, this was due to governments’ increased expenditures to address healthcare needs, as well as provide fiscal support to firms and households. More recently, higher energy and food prices, alongside other impacts stemming from Russia’s invasion of Ukraine and coinciding with the US Federal Reserve’s shift to policy rate hikes and quantitative tightening, have generated additional constraints for most sovereigns. For many governments, financing needs continue to increase while their fiscal space is shrinking. At the same time, governments are under greater pressure to meet SDG commitments. Facing these conditions, sovereigns would be well-advised to explore options for debt solutions such as debt-for-sustainability swaps which can help a sovereign reduce its debt burden while enabling it to make inroads towards meeting social and development objectives including achieving a green transition. At Citi, we are confident that governments can successfully accomplish both goals. As a sovereign and financial advisor, Citi has advised governments to execute innovative debt solutions, including assisting the Government of Belize on its debt-for- conservation swap completed in 2021. We present in this report our views on the prospects for sovereigns to execute such transactions and the key factors necessary to do so successfully. Karim Soubra Global Sovereign Advisory and Solutions, Public Sector, Citi Benjamin Charbonnel Latin America Credit Markets Origination, Citi 1 International Finance Institute (IIF) data as of Q32022. Citi Perspectives for the Public Sector 65