Developing countries spend five times more on debt than climate change, says report

Caribbean: Lower-income countries spend five times more on debt than they do to cope with the impact of climate change and reduce carbon emissions, reveals a leading anti-poverty charity.

Amounts from the Jubilee Debt Campaign record that 34 of the world's poorest countries are spending $29.4 billion in debt payments annually compared to $5.4 billion in measures to reduce the impact of the climate emergency. Uganda said it would spend $537 million between 2016 and 2020, including funds from international agencies and donors, on climate-related projects to accommodate the country's infrastructure and cope with climate crises.

Nevertheless, the annual budget of $ 107.4 million is dwarfed by external debt payments, which will total $ 739 million in 2021, and will amount to $1.35 billion in 2025.

And Uganda is not the only low-income country that will need to find extra money to pay interest on its debt over the next four years, the charity said. By 2025, the Jubilee Debt Campaign calculates that the 34 nations covered in the research will pay seven times more on debt repayments than on limiting the impacts of climate change.

Heidi Chow, executive director of the Jubilee Debt Campaign, said low-income countries will increase the impact of debt on their ability to address climate change at the Cop26 meeting in Glasgow this weekend.

"Lower-income countries are handing over billions of dollars in debt payments to rich nations, banks and international financial institutions at a time when supplies are urgently required to combat the climate crisis," she said.

"In Glasgow, rich polluting nations must stop shirking their responsibilities and provide climate finance through grants, as well as pay off debts."

Over the past 20 years, international organizations such as the World Bank and the International Monetary Fund (IMF) have encouraged countries in the developing world to finance development projects through bank loans and bonds.

Borrowers expected interest rates to drop over time as they were trusted to make regular repayments. But low-income nations still regularly pay more than 10% interest on loans, correlated with an average of 1.5-2.5% paid by rich countries.

During the pandemic, the IMF has given insurance to reduce a proportion of the debt interest paid by low-income countries, although the plan does not cover funds owed to China.

The charity said it verified 34 countries' debt payments and budget pledges supplied to the United Nations Framework Convention on Climate Change that displays plans illustrating what they expect to spend if they receive international funding and what they will spend from their own internal resources.

The report said the figures are likely to exceed spending on climate change compliance, saying, "Just because a nation has said it plans to spend money on climate change compliance does not signify that it has."

Ausi Kibowa, from the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI), based in Uganda, stated: “Due to the immense financial pressure on Uganda from the debt crisis, the Ugandan government cannot afford to spend necessary to protect people from the damage caused by climate change.

“In addition, it is intensifying the extraction of fossil fuels to pay the debt. To address climate injustice, debt assistance must be part of the forthcoming UN climate talks."

Rich countries were expected to contribute funds worth $100 billion a year to developing countries to help tackle and limit climate change. The pledge was made at the UN climate conversations in Copenhagen in 2009.

Earlier this week, Alok Sharma, the UK cabinet minister who will chair CoP26, said the target will be reached in 2023.

However, the Jubilee Debt Campaign said that of the climate finance provided so far, more than two-thirds are loans, "further exacerbating the debt crisis in lower-income nations."

Former Maldives President Mohamed Nasheed, representing the Climate Vulnerable Forum of 48 nations that are home to 1 billion people, said many countries were being overwhelmed by their external debts.