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Efforts are being made to provide debt relief in order to assist developing nations in funding their climate change initiatives.

A campaign group has sounded the alarm that the global effort to combat the climate emergency is being hindered by a debt crisis. This crisis disproportionately affects the world’s most impoverished nations, who are currently paying over 12 times more to their creditors than they are investing in solutions to address the effects of global warming.

DFI stated that the opening of the Cop28 conference in the UAE highlights the necessity for a renewed and thorough debt relief initiative in order to allocate crucial resources towards adapting to the climate emergency.

According to research conducted by DFI, the average debt service payments in 42 countries accounted for 32.7% of the budget in 2023, while addressing the climate crisis only accounted for 2.5%.

According to the report, Indonesia, the fourth most populated country in the world, intends to allocate only 0.12% of its budget towards addressing the climate crisis in 2024. In comparison, a significant portion of the budget, 29%, is expected to go towards payments to creditors. The majority of the countries included in the study anticipate spending less than 2% of their budgets on climate adaptation, with many investing less than 1%.

Matthew Martin, the executive director of DFI, stated that a significant plan for reducing debt on a similar level to the efforts in the late 1990s and early 2000s is necessary. The average debt service for 139 countries in the developing world was 38%, but for low-income countries it rose to 57.5%.

Martin suggested that in order to address the climate crisis, the international community must prioritize providing thorough debt relief to a variety of countries.

“If we reduce the debt service of countries to 15% of their revenues, similar to the heavily indebted poor country initiative, we will have sufficient funds to directly address the climate crisis.”

According to a recent report from DFI, an organization focused on debt issues, debt is already hindering countries’ ability to increase investments in combating global warming.

The challenge of paying back debtors may be contributing to the worsening climate situation. Many nations are forced to increase their exports in order to obtain the necessary foreign currency to cover the high expenses of repaying their debts. As a result, they often continue to extract fossil fuels for short-term profit and even expand such projects, potentially hindering their own efforts to transition to cleaner energy sources.

Efforts to decrease the amount of debt are being carried out individually for each country through the Common Framework, which was created by the G20 group of developed and developing nations at the beginning of the worldwide pandemic in 2020. Only a small number of countries have currently received any relief from debt, and the DFI stated that even in those cases, the Common Framework did not create space for funding climate adaptation measures.

In a separate move, more than 550 economists, development and climate experts, NGOs and activists, including leading economists Thomas Picketty and Jason Hickel, philosopher Olúfẹ́mi Táíwò and climate activist Vanessa Nakate, have signed an open letter calling for debt cancellation at Cop28.

The declaration demands the forgiveness of debts for countries with lower incomes that are “on the front lines” of the climate crisis. It also urges wealthy nations to substantially raise their provision of grant-based funding for climate-related initiatives.

Source: theguardian.com