Most low-income countries at risk of, or in, debt distress received a policy-based operation (PBO) from a multilateral development bank for COVID-19 relief. PBOs provide unearmarked finance to government budgets in exchange for policy and institutional reforms (“policy actions”).
This paper explores the current state of Paris alignment among these PBOs through bank policies and evaluations, staff interviews, an extensive analysis of policy actions and six case studies. Drawing on this data, the paper outlines some key recommendations for achieving Paris-alignment.
The paper considers PBOs to be Paris-aligned if their policy actions do not undermine a just transition to climate neutrality and support and promote long-term macro-fiscal resilience to climate risks and a just transition to climate neutrality.