LONDON- Some of the Nations most vulnerable to climate change according to a research report, will face a sharp increase in debt service payments over the next two years, affecting their ability to invest in climate protection and support their economies.
The Vulnerable Group of Twenty (V20) – a group of 55 economies vulnerable to the impacts of climate change – expect Debt Service Payments to rise to $69 billion until 2024 – the highest level in the current decade, according to calculations by the V20 and Boston University’s Global Development Policy Center.
Debt service payments in 2022 are $61.5 billion and are projected Good a tad above that in 2023, the authors said.
Emerging and developing countries (EMDs) are having a hard time with the covid19 pandemic, of Russia war in Ukraine, the climate crisis and interest rate hikes in advanced economies, wrote Luma Ramos in the report published on Friday.
A number of debt relief programs for the world’s poorest countries were launched after the Pandemic troubled global financial markets and hammered economies around the world.
However, progress has been slow and some of the programs – like the Debt Service Suspension Initiative (DSSI) – to have expired.
“Without debt relief and other complementary measures such as grants, V20 countries will defer their ability to reap the benefits of climate investments such as B. improved resilience and improved power generation from renewable energy,” the report added.
In addition, there was a change in the creditor structure of the US$686.3 billion in external government debt owed by the V20 countries. Private creditors were now the largest group, holding over a third of the debt, while the World Bank and others multilateral Institutions each held a fifth, the report said. V20 nations owed China 7% of the total, while 13% was owed to the wealthy creditor nations of the Paris Club.
The authors also asked the International Monetary Fund to update its debt sustainability analysis Account for climate risks faced by vulnerable nations.
“Given that climate impacts are increasing the cost of capital for vulnerable countries, the close link between climate change and debt sustainability needs to be grasped and should inform the discussion on the countries in need of debt relief,” the report said.
The V20 economies include Barbados, Cambodia, Costa Rica, Ethiopia, Honduras, Lebanon, Morocco, Nepal, the Philippines, Rwanda, Senegal, Sudan, Tanzania, Tunisia, Tuvalu and Vietnam.
—Reporting by Karin Strohecker; Editing by Josie Kao