Developing countries pay roughly twice as much to finance some of the same clean energy projects as advanced economies—not because their projects are inherently riskier, but because the global financial system prices risk in ways that structurally penalize the Global South. Subjective assessments in sovereign credit ratings, the dominance of dollar-denominated debt, and global banking regulations all contribute to keeping borrowing costs high regardless of a country’s fundamentals. India makes the point starkly - despite strong growth and sound fiscal indicators, it borrows at rates 300–640 basis points higher than France, Italy or Japan. Financiers on the ground point to delayed state utility payments, not currency or technology risk, as the key driver.
De-risking tools such as guarantees, blended finance instruments and payment security mechanisms can make individual projects more bankable, but they cannot affect the sovereign ceiling, dollar hegemony or rating methodologies that set the floor beneath which borrowing costs cannot fall. Fixing that requires reforming the international financial architecture - not just more money on the table, but a change in how that money is priced.
For more details, please contact:
Sehr Raheja
sehr.raheja@cseindia.org
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