For many countries, climate change is likely to lower growth and increase the frequency of natural disasters. This will strain public finances from both the revenue and expenditure sides, which will in turn lead to fears of defaults and thus raise government borrowing costs, adding more strain (Dibley et al, 2021; Zenios, 2022). How likely is it that these feedback loops will lead some countries to default? Which countries are particularly at risk?
One way to answer these questions is to overlay climate scenarios onto debt sustainability analysis, which is used to assess how well-equipped sovereigns are to meet their liabilities. Calcaterra et al (2025) developed a model to do just this and here we show results from the…
