Report: Debt costs cast a shadow over climate finance in small island states

Report: Debt costs cast a shadow over climate finance in small island states

LONDON (Reuters) – Small island developing states that are highly vulnerable to the effects of climate change and often in critical debt situations spend at least 18 times more on debt servicing than they get on climate finance, a report shows.

Iolanda writes that a group of 37 island states, home to some 65 million people, ” urgently need to increase their fiscal space to meet the multiple challenges and crises they face.” Fresnilo (LON :), co-author of the European Network on Debt and Development (Eurodad) report.

The Eurodad report found that island nations from Guinea-Bissau to the Dominican Republic to Samoa received just $1.5 billion in climate finance between 2016-2020.

It added that during the same period, 22 countries paid more than $26.6 billion to their external creditors, which include 50 NGOs.

The report found that public debt levels in island nations rose from an average of nearly 66% of GDP in 2019 to nearly 83% in 2020, and are set to remain above 70% through 2025.

This in turn means that governments need to spend more revenue on debt servicing, with countries such as Belize, Cape Verde, Dominican Republic, Jamaica, Maldives, Grenada and Papua New Guinea allocating between 15% to 40% to pay their external creditors.

More countries have turned to the IMF for help, as the number of countries with programs with the fund jumped from three in 2019 to 20 between 2020 and 2021.

In June, the fund’s executive board approved a $60 million program for Cape Verde while Barbados struck a $293 million deal in late September.

The report found that more than 80% of island nations had debt difficulties under criteria set by the International Monetary Fund and World Bank for debt sustainability analysis, or by civil society groups Debt Justice UK and Jubilee Germany.

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How to support fragile and small economies collapsing under the impact of the emerging coronavirus, Russia’s war in Ukraine is preparing to gain a lot of focus this week when policymakers from around the world gather in Washington for the annual meeting of the International Monetary Fund and the World Bank until October 16.

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