Small island developing states (SIDS) have spent 18 times more in debt repayments than they receive in climate finance, says new research
Latest analyses show 31 out of 37 small island developing states (SIDS) countries are in critical debt situation, and are having to cut public budgets over the next three years. CSOs are calling for action to tackle the twin debt and climate crises at the Annual Meetings of the World Bank and IMF
Small island developing states (SIDS) – among the most vulnerable nations in the world to climate change - have spent 18 times more in debt repayments than they receive in climate finance, according to new research published today.
The latest statistics reveal that, while all SIDS together received only US$1.5 billion in climate finance between 2016 and 2020, in the same period 22 of these nations paid more than US$26.6 billion to their external creditors.
Furthermore, 31 out of the 37 SIDs countries are today in a critical debt situation. Government expenditure is also set to fall during the next three years, meaning less investment in public services, climate action and more austerity measures.
The report, Riders on the storm: How debt and climate change are threatening the future of small island developing states, has been published today by the European Network on Debt and Development (Eurodad) to coincide with the Annual Meetings of the World Bank and IMF, and the G20 Finance Ministers’ meeting in Washington, where civil society activists from across the world are demanding action on unsustainable debt levels.
Iolanda Fresnillo, Policy and Advocacy Manager at Eurodad and co-author of the report, said: “Small island developing states are among the countries at the greatest threat from the climate and financial crises that we are facing today. They urgently need to increase their fiscal space to tackle these challenges. However, sky high debt levels, which dwarf the climate finance coming into these nations, are leading many governments to adopt austerity policies in order to pay for their debt commitments.”
Public debt in SIDS countries rocketed in 2020, increasing more than 17 per cent in one year - while the average in low- and middle-income countries was only nine per cent. External debt reached an average 82.5 per cent of GDP in 2020, and will remain at over 70 per cent of GDP until 2025, the report says. This is above the average in emerging and developing countries in Asia, Latin America and the Caribbean and sub-Saharan Africa.
Between 2020 and 2023, countries like Belize, Cabo Verde, Dominican Republic, Jamaica, Maldives, Grenada and Papua New Guinea are having to divert more than 15 per cent - and in some cases up to 40 per cent - of their government revenue to pay their external creditors.
The report calls for policies that would support SIDS and other nations in debt crisis. Recommendations include immediate and unconditional debt cancellation of all unsustainable and illegitimate debts by all creditors; immediate access to non-debt creating, or concessional, finance for the Sustainable Development Goals and climate goals; and multidimensional vulnerability indicators to define access to concessional finance and debt relief.
For the longer term, the report calls for international architecture reforms, including a permanent multilateral debt workout process at the UN that convenes all creditors
Fresnillo said: “For SIDs countries, the existing international financial system offers few options for tackling the consequences of unsustainable and growing debts. Sixteen SIDS are not eligible for the G20’s debt relief initiatives, even though some of them are at high risk of debt distress or already in debt crisis.
“Leaders attending this week’s Annual Meetings of the World Bank and IMF, and the G20 Finance Ministers’ meeting, must take action to cancel unsustainable debts and to overhaul the international financial system that is failing so comprehensively.”
Julia Ravenscroft, Communications Manager, Eurodad: [email protected] / +44 7958 184 695.