# Bringing Climate Resilience Into Sovereign Debt
**Date de l'événement :** 02/01/2025
* Publié le 02/01/2025

### Image(s)
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## Auteur(s)
Ali Benramdane

## Direction
Stéphane Guibaud

## Description
**Ce mémoire est issu de la sélection des meilleurs mémoires du master d’économie de l'année 2024-2025 :  
  
Abstract**  
  
This paper investigates the role of climate-contingent sovereign debt instruments in improving borrowing conditions, debt sustainability, and welfare in disaster-prone economies. Using a quantitative sovereign default model with hurricane risk calibrated on Jamaican data, we evaluate the performance of disaster pause clauses (DPCs) and catastrophe (CAT) bonds under both baseline and intensifying climate change scenarios. While all instruments expand borrowing capacity, DPCs lead to higher spreads and default risk due to delayed repayments and a subsequent rise in debt stock levels. In contrast, CAT bonds, particularly large CAT issuances with full coverage of the debt stock, reduce spreads and default probabilities by directly mitigating fiscal losses from disasters. Under baseline conditions, both classes of instruments result in welfare losses, either due to increased borrowing costs or premium payments that crowd out consumption. However, under an intensified climate change scenario, these losses are reduced, with the largest CAT bond issuance even yielding a net welfare gain. This result suggests that as the frequency and severity of disasters increase, climate-contingent instruments will become increasingly more relevant for policymakers in disaster-prone economies.  
  
**Keywords**: Sovereign debt, Debt sustainability, Natural disasters, Climate resilience, Fiscal relief, Borrowing costs, Default risk, Debt Pause Clause, Catastrophe Bonds, Hurricane risk, International lenders  
  
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**Accéder au mémoire en ligne :** [https://www.sciencespo.fr/ecole-recherche/sites/sciencespo.fr.ecole-recherche/files/BENRAMDANE-Ali.pdf](https://www.sciencespo.fr/ecole-recherche/sites/sciencespo.fr.ecole-recherche/files/BENRAMDANE-Ali.pdf)

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`#Accès libre` 

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