Reviews | To solve the climate crisis, it’s time to talk about debt cancellation

As climate activists, we are used to banging our heads against brick walls.

In the midst of the need to quickly move away from fossil fuels, deforestation and destructive export agriculture, we are accustomed to mustering the full weight of scientific evidence, moving testimonies, ethical arguments, persuasive pleas and creative campaigns to push for the changes needed to save the planet. . Unfortunately, we are also used to governments ignoring us and instead stepping up climate-damaging activities.

But why are so many governments making seemingly irrational decisions when the climate crisis is upon them, their own citizens are losing out, and the weight of evidence is telling them to act?

The answer might surprise you.

One of the major factors preventing governments in the Global South from taking climate action is barely discussed at conferences and debates aimed at finding solutions to the planet’s existential crisis.

It’s time for us to talk about debt. Especially now, with the recent World Bank and International Monetary Fund (IMF) Spring Meetings and economic policy options for the Global South in the spotlight. If we want countries to have the freedom to act in their best interests, we need to understand that the World Bank, IMF and private banks based in rich countries are preventing climate progress.

How? Because of their unhealthy obsession with repaying the debt of the countries of the South at all costs.

This exorbitant debt that weighs on the head of many countries forces them to make difficult choices to repay this debt. Indonesia, for example, is repaying loans equivalent to more than 40% of its gross domestic product (GDP), a key factor that led it to cut down rainforests to make way for lucrative oil palm plantations. The need to repay foreign debt worth more than 80% of GDP has also been a factor in Brazil’s prioritizing soybean exports over protecting the Amazon. And an external debt equivalent to 101% of GDP is the reason Mozambique has tried to increase its coal and gas production in recent years.

This kind of external debt must almost always be repaid in US dollars or other foreign currencies. So even when countries would benefit from supporting smallholder farmers, agroecology and small and medium enterprises, many have been forced to shape their economies around destructive fossil fuels and large-scale industrial agribusiness exports, in order to earn the dollars needed to pay off the debt. .

And the tough decisions continue, with many countries spending more on servicing their debt than on education and health. Although many have repaid their original loan amount, a combination of rising interest rates, successive currency devaluations, fluctuating global commodity prices and the destructive effects of climate change have held the finish line. repayment of debt that is perpetually out of reach.

Indeed, the climate crisis has sometimes forced countries to take out more loans at even higher interest rates.

Worse still, World Bank and IMF lending almost always comes with rules – that countries privatize public services, cut public spending and move into export production. These “conditionalities” and the power exercised by these institutions worsen the climate crisis and undermine the ability of countries to take climate action by investing in green technologies, resilience or disaster recovery.

Sniffing the climate winds of change, the IMF and World Bank are now desperately trying to get a makeover, and trying to portray themselves as responsible climate leaders. But in reality, the IMF has informed more than 100 countries to expand their fossil fuel infrastructure, while the World Bank has spent $14.8 billion to support fossil fuel projects and policies since the signing of the Paris Agreement. Their claims to be climate-responsible leaders do not stand up to scrutiny.

A new study by ActionAid reveals that 93% of the countries most vulnerable to the climate crisis are in debt distress or at significant risk of debt distress. This reflects a vicious circle in which climate impacts put countries in debt, but this debt accelerates the climate crisis and leaves countries even more exposed to its impacts. And so the cycle continues.

All this brings us to a clear conclusion: that the global debt crisis is a major obstacle to climate action and that debt cancellation can be a very effective climate solution.

A proposal from last year called the Bridgetown Initiative, devised by Barbados Prime Minister Mia Mottley, is gaining momentum and emphasizing debt and the role of international financial institutions. This initiative was initially seen as a step-by-step opportunity to overhaul the global financial system and end the damage the World Bank and IMF are causing to climate and climate-vulnerable countries.

The agenda is still shifting, but some fear that despite some progressive elements, other components could push countries deeper into debt. The proposals on the table suggest that these international financial institutions could simply change their methods and funnel even more loans to climate-affected countries while labeling them as “climate finance” for adaptation and mitigation.

Since wealthy countries bear the greatest historic responsibility for the climate crisis, it is fitting that they provide their fair share of funds in the form of grants, to support low-income countries already suffering from the impact of climate change. climatic.

International loans must not be allowed to masquerade as “climate finance,” and rich countries must not be allowed to shirk their own obligations to contribute real funds. If we are to tackle the climate crisis, debt cancellation – rather than even more spiraling debt – must be high on the agenda.

Leave a Comment