- African countries are among the hardest hit by excessive debt, hindering their ability to invest in critical areas such as healthcare, education, and infrastructure.
- This not only perpetuates poverty and inequality but also undermines Global efforts to achieve sustainable development and address the climate crisis on the continent.
Image: Moses kidandi
Debt For Climate Uganda, a local chapter of the Global Debt For Climate movement, is calling for debt cancellation and debt reforms to be on top of the agenda in the IMF-WORLD Bank spring meetings happening in Washington DC.
The meetings have attracted debt advocates from African countries demanding attention to what they have called the illegitimate Global South debts owed to the World Bank and IMF.
They are calling on the World Bank and the IMF to cite the London Agreement of 1953 in which Germany debt was cancelled, as a precedent for debt relief for the most indebted nations of the Global South.
The countries that are most vulnerable to the climate crisis are also facing a debt crisis – and the need to service external debt in foreign currency has become a major accelerator of the climate crisis.
There is a vicious cycle between the debt and climate crises, each reinforcing the other. It is thus profoundly contradictory that more than two-thirds of climate finance arrives in the form of loans that serve to exacerbate this debt crisis, forcing countries into actions that entrench the climate crisis.
According to Reagan Elijah Founder Debt for Climate,the real value of these loans is often overstated and yet, alarmingly, many of the proposals presently being considered for expanding climate finance seem to be focused on even more loans – rather than exploring fairer and more sustainable alternatives.
"Money that is supposed to help countries respond to the climate crisis should not actually make the climate crisis worse. But when climate finance comes in the form of loans, this is exactly what happens.Debt locks countries into a negative spiral – forcing governments to shape their economies and societies to pay back their debts and further harming the climate in the process" Elijah said.
According to him the pursuit of dollars by any means leads to more extraction of fossil fuels, more mining, more chemical-based industrial agriculture, more deforestation, and more environmental destruction that wreaks untold harm on human rights.
"There are clear alternatives, especially based on tax, but it is hard to justify tax reforms if all the revenue that is raised simply disappears to pay back crippling external debts.As governments converge in Washington for the IMF-WORLD Bank spring meetings, they're confronted with the daunting prospect that 2023 might be the year that the Global South debt will be at it's worst peak like that which took place in the early 1980's that led to the infamous decades in Latin America and Africa" he stated.
Currently developing countries owe an estimated $381 billion in debt service on medium -and-long term external debt. According to the world bank international debt statistics 53 countries have credit rating classifications estimated to be highly worse.
Image: Moses kidandi
This subset of developing countries owes $166 billion in debt service in 2023. The top ten debtors alone owe almost 60 per cent of this debt service, a quarter of total debt service due by developing countries.
The current debt resolution system set up by the IMF and World Bank will struggle to handle more countries if debt cancellation is not put into consideration. In 2015, Jubilee Debt Campaign projected that debt payments for low income countries are set to rise from 4 per cent to up to 13 per cent by the early 2020s.
Many countries have seen debt payments increase by even more, with Ethiopia, Ghana, Rwanda, Senegal, Tanzania, Uganda and Zambia all among countries which are spending over 21% of government revenue in debt payments and debt servicing.
This is evident in Uganda's situation. The proportion of domestic revenue Uganda is using to service it's public debt rose from 24% to 30%. Our country's foreign debt repayments are projected to hit $1.3 billion by the end of this financial year.
Elijah notes that this remains a major strain to development and fighting climate change. The country's total debt stands at about $21 billion, and is projected to hit 53% of GDP before easing by fiscal year 2024/2025.
"As debt for Climate Uganda, we are calling on the International community to stand in solidarity with the Global South and take strong, urgent action to see that the Global South debt crisis is put at the center of the discussions in the IMF-WORLD Bank spring meetings. The vast majority of the IMF-WORLD Bank spring meeting goals should be Paris aligned. We demand to see that the World Bank and IMF climate policies discussed in the spring meetings are in alignment with the goals of the Paris Climate Agreement" he added.
He demands that IMF-WORLD Bank spring meetings should prioritize putting in place credible internal processes and systems to assess and show that their finance flow meets Paris Agreement targets of keeping Global temperature below 1.5°C, phasing out fossil fuels, providing loss and damage fund, and climate finance to the most affected countries.
To achieve this, he advised that Spring meetings should prioritize debt cancellation -writing off the Global South debt, and integrating climate action into debt cancellation and debt reform programs for Global South countries that are suffering from the worst impacts of the climate crisis they didn't cause.