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Jean François Clevy, Mr. Guilherme Pedras, and Mrs. Esther Perez Ruiz
The pandemic has urged countries around the globe to mobilize financing to support the recovery. This is even more relevant in Central America, where the policy response to cushion the pandemic’s economic and social impact has accentuated pre-existing debt vulnerabilities. This paper documents the potential for local currency bond markets to diversify and expand financing for the recovery, lowering bond yields, funding volatility, and exposure to global shocks. The paper further identifies priority actions, both national and regional, to support market development.
Jean François Clevy, Mr. Guilherme Pedras, and Mrs. Esther Perez Ruiz

The pandemic has urged countries around the globe to mobilize financing to support the recovery. This is even more relevant in Central America, where the policy response to cushion the pandemic’s economic and social impact has accentuated pre-existing debt vulnerabilities. This paper documents the potential for local currency bond markets to diversify and expand financing for the recovery, lowering bond yields, funding volatility, and exposure to global shocks. The paper further identifies priority actions, both national and regional, to support market development.

Jean François Clevy, Mr. Guilherme Pedras, and Mrs. Esther Perez Ruiz

represent the views of the IMF, its Executive Board, or IMF management. Abstract The pandemic has urged countries around the globe to mobilize financing to support the recovery. This is even more relevant in Central America, where the policy response to cushion the pandemic’s economic and social impact has accentuated pre-existing debt vulnerabilities. This paper documents the potential for local currency bond markets to diversify and expand financing for the recovery, lowering bond yields, funding volatility, and exposure to global shocks. The paper further

Mr. Ananthakrishnan Prasad, Ms. Elena Loukoianova, Alan Xiaochen Feng, and William Oman

, many EMDEs and LICs have considerable pre-existing debt vulnerabilities that could be magnified by additional borrowing, including the transfer of currency and liquidity risks from private to public sector balance sheets (Annexes 2 and 3). Microeconomic constraints are primarily related to mitigation and adaptation investments and are specifically high in EMDEs . These include long timeframes, lack of large investment grade investments and liquid markets, high upfront capital and transaction costs, and significant project risks. As a result of these and other

Mr. Ananthakrishnan Prasad, Ms. Elena Loukoianova, Alan Xiaochen Feng, and William Oman
Global investment to achieve the Paris Agreement’s temperature and adaptation goals requires immediate actions—first and foremost—on climate policies. Policies should be accompanied by commensurate financing flows to close the large financing gap globally, and in emerging market and developing economies (EMDEs) in particular. This note discusses potential ways to mobilize domestic and foreign private sector capital in climate finance, as a complement to climate-related policies, by mitigating relevant risks and constraints through public-private partnerships involving multilateral, regional, and national development banks. It also overviews the role the IMF can play in the process.