Poorer countries spend five times more on debt than the amount spent dealing with the impact of climate change and in the reduction of carbon emissions.
A leading anti-poverty charity said that lower-income countries are spending more on debt payments than on climate change. Data from Jubilee Debt Campaign reflect that 34 of the world’s poorest countries are spending $29.4bn (£21.4bn) on debt payments annually in comparison to $5.4bn (£3.9bn) on steps to lower the impact of the climate crisis.
Uganda said the country would spend $537m between 2016 and 2020, which would include funds from international agencies and donors, on projects related to climate change in order to adapt its infrastructure to deal with climate emergencies.
However, it must be noted that the $107.4m annual budget is dwarfed by external debt payments which will amount to a total of $739m in 2021, increasing to $1.35bn in 2025.
The charity said that Uganda is not the only low-income country that requires finding extra cash to pay debt interest during the next four years. As per estimates from Jubilee Debt Campaign, the 34 countries included in the research will have to spend seven times more on debt payments than on the impacts of climate change by 2025.
Executive director of Jubilee Debt Campaign Heidi Chow said poorer countries will be raising the impact of debt on their ability to fight climate change during the Cop26 meeting in Glasgow this weekend.
Chow said, “Lower income countries are handing over billions of dollars in debt repayments to rich countries, banks, and international financial institutions at a time when resources are desperately needed to fight the climate crisis. In Glasgow, wealthy polluting nations need to stop shirking their responsibilities and provide climate finance through grants, as well as cancel debts.”
The World Bank and the International Monetary Fund (IMF) have encouraged developing world countries to fund development projects via bank loans and bonds in the last 20 years.
Borrowers expected interest rates to lower over time as they became trusted to make regular repayments. But low-income countries still regularly pay over 10% interest on loans in comparison to an average 1.5 to 2.5% paid by rich countries.
During the pandemic, the IMF has provided insurance to reduce a proportion of the debt interest paid by low-income countries. The scheme however does not cover funds owed to China.
The charity said it studied the debt payments of 34 countries and the budget commitments supplied to the United Nations Framework Convention on Climate Change that clearly reflect plans explaining what they expect to spend if they receive international funding and what they will invest from their own domestic resources.
The report said, “just because a country has said it plans to spend money on climate change adaptation, doesn’t mean that it has”.
Ausi Kibowa, from the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI), based in Uganda, said: “Owing to the immense financial pressure on Uganda from the debt crisis, the Ugandan government is unable to spend what is need to protect people from the damage inflicted by climate change. Furthermore, it is intensifying fossil fuel extraction in order to pay the debt. To address climate injustice, debt relief must be part of the forthcoming UN climate talks.”
Rich countries were expected to provide funding The commitment including rich countries providing funds worth $100bn per year to developing countries to aid in dealing with and limiting climate change was made at the UN climate talks in Copenhagen in 2009.
Alok Sharma, the UK cabinet minister who will be presiding over Cop26, said the goal will be achieved in 2023.
However, Jubilee Debt Campaign explained that out of the climate finance given so far, more than two-thirds is loans, “further increasing the debt crisis in lower income countries”.
Former Maldives President Mohamed Nasheed, representing the Climate Vulnerable Forum of 48 countries said, “We are so threatened that we might not have an island or a country much longer, so it’s hardly possible for us to pay the debt if we are not around. Is it not then reasonable for climate vulnerable countries to call upon debt holders to restructure their debt?”
