These costs are paid straight out of stretched national budgets, at the expense of preparation for the next climate-related disaster, as well as adaptation to the climate emergency, health, education and social protection. Global South countries are currently spending five times more on debt repayments than they are on addressing the climate crisis.
The climate emergency means more debt for the Global South. And debt means that they cannot adequately respond to the climate emergency.
In addition, climate finance provided by richer countries is not only inadequate but can make the situation worse. Rich countries have been widely condemned for their failure to meet their own grossly inadequate target of providing $100bn in climate finance a year by 2020. But worse, over 70% of that climate finance is provided in the form of loans, which simply pile more debt onto climate-vulnerable countries.
In the absence of adequate climate finance, sub-Saharan African countries alone will have to take on almost $1trn in debt over the next ten years, according to new research from the charity Debt Justice (where I work) and Climate Action Network International, a global network of environmental NGOs.
The global response has been an outright failure. The G20, a club of mostly creditor countries, set up the Common Framework in 2020 as a response to the pandemic. It was intended to facilitate countries to restructure their debts – but three years later, no debts have been restructured. Only three countries have applied, and one, Chad, has been refused debt relief outright.
Most countries have simply cut their spending: on health, education and climate response.
In February 2021, Zambia applied for debt restructuring through the Common Framework after defaulting on its loans. Much of its debt is owed to private lenders and bondholders, who have dragged their feet and are yet to agree to any debt restructuring – even though they lent to the country at interest rates as high as 9%, on the basis that the loans were risky. If they are repaid in full, they could make profits of 110%.
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