Digest #2: Hidden Debt, China’s Aid Shift, and Climate Finance in Focus

Brand new research sheds light on global finance developments, from hidden debt to Chinese financing flows. As we approach key events this year, from the Annual Meetings to COP29, these important contributions should shape debates among leaders on climate finance, the care economy, and debt sustainability. There’s also a couple of excellent T20 briefs to read up on.

Enjoy!

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Debt

• Hidden Debt Revelations, 世界银行 , Universit?t Duisburg-Essen and University of Notre Dame

Facts can sometimes be bent a little, but new research on just how much public debt is being hidden is eye-opening. The World Bank and others have discovered that around 70% of debt-stock figures need adjusting (understandable), with some debts revised upwards by more than 14% of GDP (less understandable). As the world scrambles to stabilise unsustainable debt levels, acknowledging the full scale of the issue is clearly the crucial first step.

China in the world?

• Structural Changes on the Chinese Global Foreign Aid Expenditure, Chinese Political Science Review

Jhon Valdiglesias ’s recent paper quantifies how China’s 2015 economic slowdown marked a major turning point in its foreign aid, with spending dropping from $3 billion to $2.3 billion. This shift pushed China towards more global cooperation, leading to the creation of institutions like the AIIB and New Development Bank.

What sets this study apart is its use of data models to trace these changes, offering clear insights into the global factors driving China’s evolving aid strategy, moving beyond the qualitative approach of most earlier research.

Climate finance?

• Room to Grow: Integrating Climate Change in Debt Sustainability Analyses for Low-Income Countries, Boston University Global Development Policy Center

BU’s Task Force on Climate, Development, and the IMF call for debt assessments to account for climate risks, ensuring low-income countries can invest in resilience and sustainable growth without compromising financial stability. With the IMF and World Bank reviewing the Debt Sustainability Framework, this policy paper is timely and pushes for much-needed updates.

• Informing the New Collective Quantified Goal: unpacking cost estimates for developing countries' needs, ODI Global

With the next climate finance goal (NCQG) set to be agreed upon at COP (fingers crossed), ensuring it addresses the needs of developing countries is critical—but how do we figure out how to meet those needs? A timely ODI report ahead of the November deadline reveals gaps in transparency, comparability, and data quality, stressing the importance of a clear narrative that connects climate needs, financing sources, and the larger goals of the Paris Agreement.

• Climate and development: What opportunities, what threats? Development Policy Review

The team at ODI introduced this collection of five expert takes on bridging the gap between development and climate goals, which are too often seen as clashing. Just Energy Transitions and Carbon Border Adjustment Mechanisms are prime examples of these agendas struggling to align. The contributors offer sharp, practical approaches to finding synergies, proving that climate action can drive, not derail, development if tackled creatively.

International financial reform?

• From Crisis to Reform: How the G20 Can Support the Reform of the International Financial Architecture to Unlock Private Capital for Low-Income, Resource-Rich Economies in Africa, T20 Policy Brief

Among the plethora of really important policy briefs coming out of the T20 recently (the official think tank group for the G20), here’s a particularly good one to read. Researchers from Centre for the Study of the Economies of Africa (CSEA) IDS and Brookings highlight how Africa’s low-income, resource-rich countries have faced declining GDP despite significant mineral wealth. The brief calls on the G20 to turn this around and ensure mineral resources can be leveraged for their economic development.

Check out the rest of the T20 briefs here.

• An SDR Liquidity Line for MDBs, Center for Global Development (CGD)

Andrew Powell at CGD has proposed using SDRs (the IMF’s reserve asset for central banks) as a crucial liquidity line for MDBs, turning them into an active financial tool rather than remaining unused in wealthier nations' holdings. This low-cost liquidity line would let MDBs hold fewer liquid assets, cutting costs and boosting their lending capacity by up to $60 billion. Of course, central banks and credit rating agencies have got to give the green light.

Gender economics

• Rethinking the Care Economy and Promoting Gender Equality for All Ages by Reducing and Redistributing Unpaid Care and Domestic Work, UNRISD

Ok, another T20 brief has snuck in. This paper discusses how women and girls carry over 70% of unpaid care work, trapping them in a cycle that limits education, jobs, and leadership roles. It calls for bold reforms—investing in care infrastructure, gender-equal protections, flexible work, and engaging men in caregiving—to finally address this invisible economy and drive real gender equality.

Official Development Assistance (ODA)

• The Costs of Hosting Refugees in OECD Countries and Why the UK Is an Outlier, CGD

Another reading from CGD spotlights the contentious practice of reporting the costs of hosting refugees and asylum seekers as ODA. Eye-popping figures from the UK—spending $25,600 per person, more than four times the average—raise big questions about how these costs are calculated. Click through for the sharp graphs, but it’s clear the UK’s outlier status fuels broader concerns about ODA accounting transparency.

What else should we have picked? Comment below with your favourite articles this month.