When

Date: 22 October 2024

Time: 4:30 PM to 6:30 PM

Where: Hotel Lombardy, 2019 Pennsylvania Avenue N.W., Washington, D.C. 20006

Hosted by: Co-Chairs of the Strategic Advisory Group, H.E. Gaston Alphonso Browne, Prime Minister of Antigua and Barbuda, and H.E. Dr. Mohamed Muizzu, President of the Maldives.

Context

The Small Island Developing States (SIDS) face unique challenges exacerbated by climate change and vulnerabilities within the global financial architecture. Despite contributing less than 1% to global greenhouse gas emissions, SIDS face disproportionate climate impacts. IIED’s most recent research Sinking islands, Rising debts shows that the mounting frequency of climate-induced disasters not only threatens their environmental integrity but have devastating economic consequences. SIDS constitute two-thirds of countries experiencing the highest relative annual losses from such eventscreating a ripple effect that manifests in to escalating debt. SIDS constitute two-thirds of countries experiencing the highest relative annual losses from such eventscreating a ripple effect that manifests in to escalating debt. Over 40% are nearing or already in debt distress, and an alarming 70% surpass the debt-to-GDP sustainability threshold of 40%. Six SIDS have debt-to-GDP ratios exceeding 100%.This debt crisis impacts more than just finances, it limits investment in social services, social protection and resilience-building, exacerbating poverty and inequality. Furthermore, it hampers progress towards global Sustainable Development Goals (SDGs) by diverting funds to debt servicing.

To address these challenges, the Strategic Advisory Group (SAG), co-chaired by H.E. Gaston Alphonso Browne, Prime Minister of Antigua and Barbuda, and H.E. Dr. Mohamed Muizzu, President of the Maldives, has been working to develop a comprehensive solution: the Global SIDS Debt Sustainability Support Service (DSSS).

Several key developments have occurred since the previous discussions at the World Bank Spring Meeting in April 2024:

• United Nations general assembly endorsement:
  In May 2024, the UN General Assembly endorsed the creation of a new 10-year programme of action for SIDS, named the Antigua and Barbuda Agenda for SIDS (ABAS). This programme includes the establishment of the Global SIDS Debt Sustainability Support Service, with the goal of supporting SIDS in executing a new financial compact for resilient prosperity. The design document of the DSSS launched at the event can be includes a holistic response that supports SIDS in achieving resilient prosperity by focusing on debt sustainability, resilience investments, capacity building, and insurance protection
• Operational phase of the DSSS:
  The SAG formally launched the operational phase of the DSSS on 12 September 2024. This phase marks a critical transition from planning to action, with a focus on establishing the structures and processes necessary for effective implementation. The operational phase aims to ensure that the DSSS is responsive to the diverse needs of SIDS by creating regional consultation processes and coordination hubs. These efforts will guide the design and implementation of initiatives that address debt sustainability, resilience investment, capacity building, and insurance protection across the Caribbean, Pacific, and AIMS regions. Specifically, the operational phase will develop concrete solutions such as aggregate mechanisms for debt sustainability, designing resilience bonds that can attract private sector investment, developing tailored insurance products to protect against climate-related losses, and providing capacity-building support to SIDS. Additionally, defining roles and responsibilities, setting up governance frameworks and ensuring accountability and effectiveness in delivering the DSSS objectives.
• Regional consultation process:
  Regional consultations are being planned to get inputs for the operational phase, so that it is designed to address the unique needs of each SIDS region. These consultations will involve stakeholders from governments, financial institutions, civil society, and regional organizations to gather insights on regional priorities and specific challenges. The consultation process will be conducted across the Caribbean, Pacific, and AIMS regions, with the goal of securing buy-in from all stakeholders and ensuring that their voices shape the DSSS framework. This inclusive, bottom-up approach will enable the DSSS to be both region-specific and comprehensive, addressing disparities in economic status, climate vulnerability, and institutional capacity among SIDS.
• Reform of international financial architecture:
  The SAG is also focused on advocating for reforms in the international financial architecture, particularly targeting credit rating mechanisms. Currently, these mechanisms often fail to account for the unique climate vulnerabilities faced by SIDS or the potential for resilience-building investments to mitigate risk. The SAG is working to ensure that climate vulnerability and resilience investments are incorporated into credit assessments. By doing so, the goal is to create a more equitable financial environment that enables SIDS to access financing on favourable terms, ultimately reducing their financial vulnerability and supporting sustainable development.
• Expanding DSSS to other developing countries:
  Beyond the immediate focus on SIDS, there are ongoing efforts to expand the scope of the DSSS to benefit other vulnerable developing nations. Collaborations with the Finance for Development (FFD4) initiative are underway to explore how the DSSS framework can be adapted to address the needs of Least Developed Countries (LDCs) and other developing countries facing similar challenges. By broadening the reach of the DSSS, the initiative aims to provide a more inclusive support mechanism that addresses global vulnerabilities linked to debt, climate risks, and economic instability, ensuring that no vulnerable country is left behind.

Purpose and Objectives of the Side Event

The purpose of the side event is to advance the operational phase of the DSSS by engaging with a diverse range of stakeholders, including government representatives, financial institutions, civil society organisations, and international partners. The event will focus on refining the solutions proposed under the DSSS, with an emphasis on:

• Identifying and discussing aggregate mechanisms that can be implemented to create fiscal space for SIDS, such as debt restructuring and new financial instruments.
• Exploring the structure and potential of resilience bonds to attract private sector investment in SIDS, addressing climate vulnerabilities while generating sustainable financing.
• Considering how insurance products can be tailored to the specific climate risks faced by SIDS, providing financial protection against extreme weather events and other climate impacts.
• Outlining the types of capacity-building support needed by SIDS, including financial management, project implementation, and technical training, as well as discussing the most effective methods for delivering this support.

The objective is to gather input from participants to shape the operational phase of the DSSS, ensuring that the proposed solutions are both practical and aligned with the unique needs of SIDS regions. The side event aims to foster a collaborative atmosphere where participants can contribute their expertise and perspectives, helping to develop an actionable roadmap for the DSSS that will be implemented across the Caribbean, Pacific, and AIMS regions.

Proposed Agenda and Format

• Welcome and Keynote Addresses (15 minutes): Overview of the event's objectives by SAG co-chairs.
• Presentation of the DSSS operational phase (15 minutes): Presentation by IIED on the current status of DSSS and the next steps in operationalisation.
• Panel Discussion: Regional needs and global support (50 minutes): Focused discussion on aligning international support with regional needs, incorporating perspectives from financial institutions, climate experts, and SIDS representatives.
• Closing remarks (10 minutes): Summary of key takeaways and next steps.