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Mahesh

26/06/22 08:25 AM IST

Biodiversity Loss May Push Developing World Closer to Default

In News 
  • As per a study by British Economist, loss of biodiversity will downgrade the credit ratings of several countries, including India, increasing their bankruptcy risk.
Major findings 
  • The team claimed that investors and corporations ignoring biodiversity loss from calculations could lead to market stability being undermined. They found that at least 58 per cent of the 26 countries would face a detrimental impact.
  • Sovereign credit ratings are an independent assessment that determines the creditworthiness of a country.
  • Sectors most affected: “partial ecosystem collapse” of sectors such as fisheries, tropical timber production and wild pollination. (based on World Bank Prediction)
  • Worst affected: China and Malaysia would be the worst affected with downgrades of more than six notches.
  • On India: The downgrades to four notches for India and other countries means that they will be burdened with billions of dollars in interest. Twelve of the 26 countries analysed will be at the risk of bankruptcy.
Impact on Economy 
  • As nature loss reduces economic performance, it will become harder for countries to service their debt, straining government budgets and forcing them to raise taxes, cut spending, or increase inflation.
  • Developing countries are already saddled with crippling debt burdens driven by COVID-19 and soaring prices, and the loss of nature will push these countries closer to the edge.
  • India’s debt burden is expected to increase to 8 per cent of the country’s gross domestic product ( GDP) by the end of March 2022.
Source- Indian Expresss 

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