Financing green transformation in developing countries

ABSTRACT The prospects for external financing of green transformation and resilient post-COVID-19 recovery remain bleak for developing countries. The scope for mobilising substantial domestic resources is limited, while public-private partnerships and blended finance failed to mobilise promised finance. Borrowing from central banks remains the only viable option for financing green transformation. The conventional arguments against such borrowing, e.g. growth retarding acceleration inflation or macroeconomic instability do not have sound theoretical or empirical basis. However, democratic oversights are needed against fiscal abuse to ensure productive utilisation of borrowed funds. A high degree of coordination between fiscal and monetary authorities is also essential.