Financing a sustainable recovery from the COVID-19 pandemic

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The fiscal and monetary environment in Emerging Asia remains challenging. The current context calls for innovative financing solutions to finance the recovery post-pandemic. The chapter explores these solutions at length. First, policy makers should consider options for managing the stock of public debt, including participation in multilateral initiatives, swap arrangements, or debt buybacks. Alternative financing sources such as green, social and sustainability bonds can enable a sustainable and equitable recovery. The development of this market segment requires resolute policies, including robust regulatory frameworks, higher supply of sovereign bonds, and incentives to increase investor participation. In addition, insurance-linked securities could provide an extra layer of financial coverage against extreme events such as pandemics. There is also scope for regional co-operation in financing the recovery. For instance, sovereign catastrophe risk pools could provide a mechanism for Emerging Asian governments to enhance their financial preparedness against pandemics and other large external shocks.